Universal Life Insurance is a permanent life insurance. This type of insurance was first introduced in America by Hutton Life. They are different from whole life insurance policies because the cash values, premiums and the sum insured can be adjusted - up or down, depending on the insured’s needs, after the first year of premium, which is fixed.

Another feature is that the interest credited to the cash value is at the market rate, although it is normal for a minimum interest rate to be fixed. Universal life insurance policies may be purchased with one of two different death benefit options. The first option operates like the ordinary life policies (traditional whole life policies) and provides a constant or level death benefit. The second option provides a death benefit, which is equal to the original sum insured (face amount) and the accumulated cash values, at the time of death of the insured.

Some people may feel that this type of policy is the only type a person needs in his entire life because of the above flexibility to make necessary or desired adjustments as universal life insurance provides more options than whole life insurance.

Variable Life Insurance is a permanent life insurance. It provides the policy owners the right to direct the types of investments to be taken up to build up the cash values in the policy. This type of insurance is designed to offer more flexibility to the policy owners and they can choose when to top up or how much, or on what. The value of their policy is linked directly to the investment performance. However, the total risk of the investments will be borne by the policy owner. It is more widely known as “Investment-linked Life Insurance” in United Kingdom and Southeast Asia.

These policies carry more risk than the traditional whole life insurance policies. Individuals considering purchasing a variable life insurance policy should be experienced investors in equity investments.

Variable Universal Life Insurance is a combination of Universal Life Insurance plus Variable Life Insurance in the sense that it enjoys the flexibility of withdrawing cash values without terminating the policy. At the same time, the owner has the right to choose the types of investments he wants. It is a flexible premium, permanent life insurance policy that allows you to have premium dollars allocated to a variety of investment options, including a fixed account. The policy generally provides income tax-free death benefit, has a cash value that grows tax-deferred, and is accessible through policy loans and/or withdrawals. Note that loans and withdrawals will reduce the death benefit by the outstanding loan amount plus any interest.