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Life Insurance: Term Or Universal?
By: Ron King
Deciding on the wrong life insurance plan might leave a family without financial
resources at the worst possible time.
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.
About the Author:
Visit http://www.lifeinsuranceconnect.com to learn more. Ron King is a full-time
researcher, writer, and web developer, visit his website at http://www.ronxking.com
Copyright 2005 Ron King. This article may be reprinted if the resource box is
left intact and the
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