Insurance first originated in Europe and developed most maturely and well in the U.S. with the help of sophisticated financial markets. the first insurance company appeared in the U.S. in 1735 and the first life insurance company was established in the 1750s and the first life insurance policy was written a few years later. After nearly 300 years of development, life insurance products eventually evolved into five broad categories.

I. The first life insurance product to appear in the U.S. market was Term Life. As the name implies, the insurance company pays the beneficiary a death benefit when the insured dies during the term of the policy. This type of insurance only covers a certain period of time, such as 10 years, 15 years, 20 years and up to 30 years. If the insured person passes away during the term, the insurance company pays the sum assured. The advantage is that the premium is cheap, but it does not have a cash value and does not have the function of saving and investment. Also, after the insurance contract expires, it becomes very expensive to purchase insurance again as the insured person ages. These products are best suited for people who need to obtain short-term protection and have a more limited budget.

The liability and rights of such insurance contracts are simple and straightforward, with payment taking effect and payment at death, so as of today it is still one of the hottest selling policy products in the market, with the number one product market coverage in terms of the number of people insured.

While the advantages and disadvantages of this type of insurance are outstanding, the biggest advantage is the low premiums. In the U.S., a 40-year-old male with a $1 million maximum 40-year term life insurance policy can have annual premiums as low as less than $3,000.

The disadvantages of the policy are: firstly, the single function of the policy, only after the death of the insured can receive compensation, and can not provide protection for serious illness and poverty and other pre-life risks; secondly, the insurance company limits the insured to a certain age after the insured is no longer accepted, the maximum age of insurance is only up to 69 years old. The longest policy life in the market generally does not exceed 30 years, and the longest is only up to 40 years.

Second, the second to take the stage is whole life insurance (Whole Life). Since the restrictions on the insured age and policy life of term insurance prevented customers from insuring at an advanced age, whole life insurance products began to appear in the U.S. insurance market since the 1950s. As the name suggests, these insurance contracts provide that the policy term can be extended to age 100 (now 120) as long as the policyholder pays the premiums at the contracted schedule, and if the insured is still alive at that time, the insurance company will pay the entire policy benefit to the beneficiary.

Compared with term insurance, whole life insurance's is a better solution to the problem of being uninsurable at an advanced age and can use the cash value in the policy as one of the sources of pension. Later on, insurance companies have gradually added riders such as terminal illness, chronic disease, and long-term care to the policy, further enhancing the policy's functions.

The disadvantage of whole life insurance is that the payment schedule is extremely inflexible and failure to pay at the agreed-upon schedule will cause the policy to lapse. And because the policy promise not to lapse largely limits the rate of return on the cash value account, resulting in very expensive premiums and very low policy leverage.

Third, the next thing that comes up is Universal Life (Universal Life). Universal life insurance, similar to whole life insurance, is guaranteed for life. The premiums, after paying for the cost of insurance, are put into a separate account for investment. The difference between the two is that universal life has more flexible regulations, and the policy owner can pay the premiums at any time, for as much or as little as they want, subject to a minimum level of payment. It also has a cash value, which is the fees paid and profits earned minus insurance fees and charges. Universal life insurance returns are generally tied to the interest rate market, and in the current low interest rate environment, the return on investment on universal life insurance is generally too low, which makes it necessary for policyholders to put up higher premiums to cover the cost of insurance in order to maintain the effectiveness of the policy. This type of insurance has a certain degree of flexibility compared to early whole life insurance, and in recent years whole life insurance has been adjusted in terms of payment arrangements, so the advantages of this type of insurance are no longer outstanding, and has now been withdrawn from the mainstream of the market in the U.S. (Some views treat universal life insurance as a large class of insurance products and classify GUL, IUL, etc. as a subdivision product category).

IV. Investment Universal Life (VUL) and Guaranteed Universal Life (GUL)

Since the U.S. market interest rates reached a historical peak in the 1980s, interest rates as a whole have shown a gradual decline over the past 40 years. This trend has brought a major impact on whole life insurance products that are mainly invested in bonds, specifically in the form of lower and lower policy yields and dividend rates, thus causing premiums to become more and more expensive and the asset allocation of their cash value accounts to become a new problem. In order to solve the problem of declining income level, two solution ideas have emerged in the market and correspondingly two types of new products have been born.

The first category is investment universal life (VUL), which is designed with the idea of investing all of the premiums available for investment in the stock market in order to obtain a higher rate of return than traditional whole life insurance investment targets such as bonds. The advantage of these products is that they offer high returns and can earn high rates of return during bull market phases. The disadvantage is that the cash value of the policy drops too much during the down phase of the stock market, and the risk of policy lapse rises significantly if the decline occurs when the policyholder enters his or her senior years. Such products are also subject to SEC regulation at the time of sale due to their direct link to the capital markets.

The second type of product is the opposite of VUL in that it is designed to ensure that the policy does not lapse at the lowest possible premium level, while investment income is appropriately forgone. Such products are called Guaranteed Universal Life (GUL), where the cash value account under the policy is lower and the investment function of the policy is much reduced. In a sense, this type of insurance is like a whole life insurance policy with no fixed term, which ensures that the policy will not lapse as long as the policyholder pays the premiums on time. Although this type of life insurance has the advantage of low lapse risk, the market share has been low because it can only address death benefits but not retirement needs.

V. Indexed universal life insurance (IUL)

From the above we can see that the insurance product is designed with the following in mind.

To address the risk of premature death - term life insurance.

To address the risk of dying too late - whole life insurance.

To address the declining returns of whole life insurance - investment universal life insurance.

To address the high fees for whole life insurance - guaranteed universal life insurance.

The investment income of the cash account does not refer to the market interest rate and has nothing to do with the company's business condition, but to the three major indices, S&P 500, Hang Seng Index and STOXX 50®, and the investment income is linked to the trend of these indices. Even if all three indices go down, the investment return will not be negative and the principal will not be lost. This product is the most advanced life insurance product in the world, which has achieved a good balance between high return and capital preservation, and has been sold in the U.S. since the 1990's. It has been a best seller since then, with an annual market increase of 23%.