Term, Whole and Universal Life Insurance
Life insurance is not pleasant to think
about. It is difficult to think about personal
death and your family’s future. But
it is something you have to do. Before you
make any decisions, you should know the
differences between term, whole
and universal life insurance. Dan Wilson
of Best Syndication describes the differences
in “Life Insurance-Term Whole and
Mortgage Properties-Compare Rates and Terms
of Policy.”
“Term
life insurance is a temporary insurance.
Guaranteed renewal is an important policy
feature for any prospective owner to consider
because it allows the insured to acquire
life insurance even if they become uninsurable.”
Term life insurance typically costs much
less than whole life insurance because there
is no guarantee.
“Whole Life Insurance is a permanent
type of insurance. These policies provide
a level premium, and a cash value table
included in the policy guaranteed by the
company. The primary advantages of whole-life
insurance policies are the guaranteed death
benefits; guaranteed cash values, fixed
and known annual premiums, and mortality
and expense charges will not reduce the
cash value shown in the policy.”
You may be able to increase the death benefit
of the term life insurance by paying additional
money. You can also access loans from the
term policy, but this will ultimately decrease
your death benefit.
“Universal life insurance is a type
of permanent
insurance. It is a relatively new product
intended to provide permanent insurance
coverage with greater flexibility in premium
payment. If interest rates rise, the premium
may actually go down. This is due to the
increased dividends paid by the company.”
A major disadvantage of universal life insurance
though, is that the policy lacks the guarantees
associated with whole life insurance, concerning
death and cash values.
Like any major policy, life insurance will
have a legal binding contract. Make certain
that you read all the terms and stipulations
within the contract. Many life insurance
policies will have a suicide clause stating
that the policy will be terminated if the
insured commits suicide within two years
signing.
“Any misrepresentations on the policy
can cause the policy to become null and
void as well. Most life insurance policies
have a contestability period of two years.
If the insured dies within this period,
the insurer (i.e. life insurance company)
has the legal right to contest the claim
and request additional information before
deciding to either pay or deny the claim.”
Having life insurance is equivalent to providing
financial assistance for your family once
you die. Since it is a binding contract,
you should be sure that you know exactly
what you are signing and that you are comfortable
with the stipulated terms.
