Explain the types of whole life insurance policy? What are the types of permanent life insurance policy?

Types of permanent life insurance policy
The following are the basic kinds of permanent life insurance policy: 

o Whole life.
o Limited-pay life.
o Endowment insurance. o Universal life.
o Variable life.

Whole life insurance policy

This policy covers the insured for whole of his life, with premiums to be paid whole life. Whole life policy gives fixed amount on death of insured, and part of the premium goes toward building cash value from investments made by the insurance company. Cash value increases on a tax-deferred basis each year. The amount paid usually doesn't change throughout the life of the policy. The following are the advantages of whole life insurance: Fixed premiums for the whole life policy. Automatic savings account for the policyholder. Cash value builds on a tax-differed basis. Helps to borrow from cash value. Cash value can be paid as policy premiums. Converts cash value to an annuity at the time of retirement.
The following are the disadvantages of whole life insurance: Higher initial premiums. Long term guarantee that can reduce flexibility by locking in to a stream of payments.

Limited-pay life insurance policy
Limited-pay life is a permanent life insurance policy which involves premium payment for a limited period-generally for a fixed number of years or until the policyholder reaches a stated age. Examples for limited-pay policies are twenty-pay-life (premiums payables for 20 years), pay-to-sixty-five
(premiums payable for 65 years). The premium is more for limited-pay policy when compared to whole life policy for the same amount, but generally cash-value builds up faster in limited-pay policy.

Endowment insurance
Endowment policy is basically a whole life policy with a maturity or endowment date which occurs after a certain number of years or at a certain age. The people who purchase the endowment policy work with the principle that when a policy matures the amount by which the amount paid on view exceeds the amount of premiums paid by the policyholder and added to the policyholder’s income. Generally in endowment policy, the premiums are paid when the policy matures or when the policyholder dies. If the policyholder dies before maturity of the policy, the face amount of insurance is payable to the designated nominee. An endowment policy matures more quickly when compared to an ordinary life policy and its cash value will be equal to its face value at maturity, the premiums should be considerably more.

Universal life
Universal life policy is also known as flexible premium. It was first started in the USA in 1970s and in India, the Insurance Regulatory and Development Authority (IRDA) introduced it in 2009. The policy has gained more
prominence in Europe and US markets as they encourage the policyholder to borrow money from insurance companies in the form of loans to raise the finance support. In India, few companies such as Reliance Life Insurance Co. Ltd and Bharti Axa Life Insurance Co. Ltd have universal life plans. It is a variation of whole life insurance. Like whole life, it is also a permanent policy providing cash value paybacks based on current interest rates. The feature that distinguishes universal life policy from whole life policy is that the premiums, cash values and level of security can step up or down during the contract term when the policyholders wants to change. Cash values earn an interest rate that is set occasionally by the insurance company and is usually guaranteed not to drop below a certain level.
Universal life insurance addresses the apparent disadvantages of whole life - namely that premiums and death benefit are fixed. With universal life, both the premiums and death benefit are flexible. But with regards to guaranteed death advantage in universal life, the flexibility comes at a price and the guarantee is reduced.

Variable life insurance policy
In variable life insurance most of the premium amount is invested in one or more investment accounts. The policy holder can choose to invest in stocks, bonds, mutual funds and fixed-income investments. The interest earned from these investments increases the cash value of the policy. The risk tolerance and the investment objectives of the policy holder determine the type of investment made. Some insurance companies also permit the policy holders to switch from one investment to another.