The biggest question facing many life insurance buyers today is, “Do I need Term Life Insurance or Universal Life Insurance?” The real question should be, “What is Term Life Insurance and how does it differ from Universal Life Insurance?” Many people really don’t understand these two types of life insurance. And admittedly, it is confusing. In this article I will attempt to simplify these two contracts for you so that you can make an informed decision as to what is the best insurance policy to fit your situation.
Term life insurance: This type is temporary insurance that covers you for a set period of time— 10 years, 20 years, 30 years. If you die during that period, you beneficiaries receive the death benefit you have established in your policy. Premiums are based on the amount of coverage and the length of term needed; coverage amount range from 100,000 to more than $1 million. Terms length are generally in five year increments, from 10 to 30 years. If you are someone who is looking to cover temporary expenses for a specific period of time, such as the length of home mortgage or until the family’s last child graduates from the college. Generally, term life insurance is the lowest-cost type available.
Universal life insurance: This is a permanent life insurance policy that typically covers you for a life time, but a portion of your payments funds an interest-earning account that accumulates cash value over a policy’s lifetime. Generally, universal life is more flexible than term life: you can increase funds to the accumulated cash value, up to a specified amount. The growth in cash value is tax-differed according to current federal income tax law. You can also reduce or stop paying premiums as long as you maintain certain minimum cash value levels. And you can, with approval, increase the amount of coverage to suit your current needs. Coverage amounts range from $100,000 to $1 million. If you are looking for a life insurance policy that will last a life time but also prefer a policy with some flexibility, this is the type of policy you should consider.
Several factors determine the right type of life insurance and right coverage amount. Factor you need to consider include your income, whether you’re planning on having more kids, whether you own a home, how much debt you’re carrying, how much you’ve saved fro college or retirement, and benefits you have at your job. Once you determine the coverage and type of insurance obtain few quotes from multiple providers. With online insurance quotes it is fast, free and easy and there is no obligation.
