Universal life insurance: This is more flexible than traditional whole life, because the premiums can vary from year to year, and in certain cases the premiums can even be skipped. Universal life has maximum guaranteed premiums and minimum guaranteed cash values and death benefits. Instead of dividends, universal life policies earn interest at the credited interest rate determined each year. If you need premium flexibility, especially in the early years of the policy, universal life is for you.
Traditional whole life insurance: This type offers the most guarantees. The annual premium is guaranteed, and there are minimum guaranteed cash values and death benefits. Most whole life policies these days are "participating," meaning that the dividends they earn can be used to increase the cash value and/or death benefits, decrease the premiums or be refunded in cash.
Variable life insurance: If you consider yourself a knowledgeable and risk-accepting investor, check out variable life. Variable life insurance has the fewest number of guarantees and therefore offers the greatest potential for cash-value increases.
There are required guaranteed annual premiums and a guaranteed minimum death benefit. However, there is no guaranteed cash value, and you have to select the investments for your policy.