Choosing between term and universal life insurance plans can be confusing. Only with some research and planning can a responsible choice be made.
Do You Even Need Life Insurance?
Before deciding between term and universal coverage, consumers need to determine whether or not life insurance is actually needed.
When you come right down to it, it's a matter of money -- if death would cause a financial burden for the family, then life insurance is critical. Financial matters to be considered include funeral costs, college tuition, and all outstanding and upcoming debts. For single people without children or dependents, life insurance is really optional.
Once you've made the decision to buy life insurance, then it's time to determine which kind of policy is right. This is when you need a reputable insurance agent, referred to you by someone you trust. The agent can help you deal with the details of the various benefits and costs of multiple policy types.
Term Life
Term life insurance policies are among the most flexible and economical types of life insurance coverage available. These policies are designed for those who want basic coverage for a set time period without a savings account built in. This means that there will be no return on the money paid into the policy over the years.
Premium rates for a term life policy vary with the policy. Policies are usually purchased for 10, 15, 20, 25 or 30-year periods, and they may be renewable. Apart from low rates, the variety of term periods is one of the most appealing features.
For instance, a couple with a child entering college who want to ensure that tuition will be paid for in the event of their death, can purchase a term life policy for just those years. There is no reason to purchase a lifetime policy for a short-term need. Term policies with increasing or decreasing coverage are also available.
A disadvantage of term life policies is the inconsistency of their rates. While premium rates start out very low, they usually rise as policyholders age. Also, policyholders who want to renew after the initial term has ended, may find the renewal fees prohibitive.
Universal Life Insurance
Universal life insurance policies will pay any necessary death benefits, but also provide policyholders with an additional tax-deferred savings account advantage. Generally these policies must be held for a minimum of 15 years before resulting in any return from the savings account. They provide policyholders with a stable long-term investment that can be borrowed against or cashed out.
The premium rates and coverage provided by universal life policies remain constant throughout the years. Premium rates tend to be higher than with other policies, largely due to agent commissions, but under some plans the rates drop as the policyholder ages and may even disappear altogether. Unless the policy lapses, there are no renewal fees to contend with.
While some financial experts argue that there are better investment options available for educated consumers, many recognize universal life policies as having sound investment benefits.
By Ron King
2 comments:
If you look at the huge buildings in any major city it is good to know they were built by Universal Life policies. By mixing insurance with an investing component brokers can reap huge comissions. Why not buy 20 or 30 year level term, which is the lowest cost of insurance, take the rest of the money and invest in index mutual funds. You will have far more money in the long run. Not to mention getting out of Universal policies is hugely expensive as well.
As I search the internet for 'whole life insurance' info. I come across enough information to keep me busy for some time so I thought I would return the favor and let you know about a book that I think everyone posting/reading about whole life insurance (and beyond) would benefit from reading. It's called "The Pirates of Manhattan" and is quite new from what I understand. I learned a lot by reading it and obviously recommend it or else I wouldnt be wasting my time writing this blog about it. My friend told me about it and got it from www.thepiratesofmanhattan.com
I found the information to be very useful (discusses why whole life insurance should be a priority...reveals info about corruption on Wall Street, stock market, etc.) and hope you do to.
Enjoy.
Post a Comment