One thing that anyone interested in purchasing a life insurance policy needs to weigh is term vs universal life insurance.
These are two of the basic categories which almost every policy on the market falls into, which means that it is also the first decision that consumers need to make when they’re looking for life insurance coverage.
There are a few very important differences between the two kinds of life insurance which are important for consumers to know before they make a decision. Different kinds of life insurance policy are a better fit for different people and knowing as much as possible about each of your options will help you to make the right decision about your life insurance.
Term Life Insurance
One of the biggest differences between term vs universal life insurance is that term life is, as the name suggests, a temporary life insurance policy. The policy is only in place for a certain amount of time, usually ten, twenty or thirty years; while it is usually possible to renew your term life policy once it expires, you will generally have to have a new physical exam and often, higher premiums for your new life insurance policy.
You may also be able to find a convertible term life policy, which may be converted to a universal or whole life policy at a later time without requiring you to submit to a medical exam. However, your premiums will likely go up, since you’ll be older when you convert the policy than you were when you first purchased it.
Universal Life Insurance
One of the biggest distinctions to be made when comparing term vs universal life insurance is that not only is a universal life insurance policy permanent (as long as you continue to pay your premiums), it also provides an investment vehicle along with life insurance coverage.
As far as your insurance coverage goes, your policy will renew each year unless you request otherwise; your premiums will typically rise at every renewal due to your increasing age.
However, this gradually increasing cost over time is offset by the investment account created by a universal life policy. Some of the money you pay in premiums will be invested in money markets, bonds, real estate or other financial instruments – and you’ll be able to access any dividends from this investment account.
Which kind of life insurance is right for you is something that only you can decide; you’ll have to look at your own financial circumstances and think about what might be coming your way in the future. Only then will you be ready to take things a step further and start comparing term vs universal life insurance.