The earliest form of permanent life insurance is the whole life policy. The whole life policy was designed to extend the life insurance coverage until the insured either dies or to the age of 95 when the policy requires no further premiums. This concept of life insurance is different from term life insurance because the term policy covers the insured for a specific period of time only. The whole life policy had its advantages before the higher inflation years of the seventies and eighties. Inflation affected our economy dramatically and ultimately affected the purchase of whole life insurance. The cash value increase in whole life insurance was so slow that it could not keep up with inflation. Insurers were creating new concepts to purchase life insurance. Buy term and invest the difference was the most popular concept. Proponents of this concept claimed that it would be better to purchase term life insurance at a lower rate than the whole life policy and use the difference in the savings to invest in the stock market or mutual funds. This concept had marginal success but another form of permanent life insurance called universal life insurance surfaced in the eighties.

Universal life insurance policies have the features of both term and permanent life insurance in one policy. Universal life is called flexible premium life insurance by some companies. The whole life policy had fixed premiums and a fixed scale of cash value increase. The universal life policy is completely adjustable based on the premiums paid. You can pay a target premium that will sustain the policy over a lifetime or you can adjust the premium up or down. The adjustments in premium raise or lower the cash value of the policy. You can borrow money or take partial surrenders of cash from the universal life insurance policy. Universal life policies are a little more complex but give the policyholder a lot more options and flexibility.

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