Life Insurance: Term or Universal?
Not sure whether to buy term or universal life insurance? This article aims to provide you with the information you need in order to make an informed decision.
Term life insurance is a type of life insurance that provides a death benefit for a specified, agreed-upon time period, such as 10 years. Term insurance is typically more affordable than universal life and it's available at most ages. There are two significant downsides of term coverage: first, it only provides protection during the policy period; and second, because its premiums are lower, you'll be paying less per month but more over the length of your contract. This can cause you to run out of coverage if you die sooner than your policy specifies.
Universal life insurance is a type of life insurance that allows your premium payments to be invested into an account in which the gains in the fund are tax-deferred. Universal life policies are flexible, and you can choose to stop paying premiums at any time, although the insurance remains in force until the end of its term or until all premium payments have been made. If you stop paying premiums on a universal policy, the total amount left unpaid will be paid as a death benefit unless it is canceled before it matures.
Universal life insurance can be considered a hybrid because it combines some of the elements of whole and term policies. It offers an opportunity for long-term coverage because your premiums remain level over time, avoiding the risk of running out of coverage due to the early death of the insured. However, universal life insurance is more expensive than term life – although its premiums tend to rise more slowly over time – and in most cases it's not available until you're at least 40 years old.
Which type is right for you? Ultimately, deciding on which type of policy is best for you depends on your financial situation, goals and needs. A few key points to consider:
If you want guaranteed protection for a shorter period of time, term insurance is the best option. However, if you're looking for more coverage over an extended period of time and you have the money to pay a higher premium each month, universal life insurance could be a good fit.
Term policies are easy to understand and can be used as a building block for your overall financial plan. As such, they're ideal for those who are new to insurance or who don't want to pay more than $1,000 or $2,000 per year in premiums.
Universal life insurance is much more expensive and usually comes with higher premiums, although you can usually buy it when you're older than 40. It also provides fewer benefits than term life.
Investment options for universal life include stocks, bonds and mutual funds. You can also access gains from this type of insurance via retirement investment vehicles like 401(k)s and IRAs. Many companies offer both universal and term coverage in combination with their products. There are some cases where a company offers only one or the other type of policy; however, in the vast majority of cases the plans offered are a combination of these two types.
Although the overall cost of universal life insurance usually involves higher premiums, this expense is offset by more investment options that can yield more retirement income. As such, universal vs. term coverage is a matter of personal preference and your financial situation.
In some cases, you might not have enough money to buy either type of policy at all times. If this is the case, consider buying term only for a certain period of time and then switching to universal once you have enough money in your savings account (or otherwise) to do so. Buying just term insurance has its own advantages: You will save on premium payments, and because there is always an opportunity to switch to universal later on if you have the funds to do so.
A qualified advisor can help you to decide whether term or universal life insurance is right for you. A professional who has the necessary education and training to help you will be able to assess your current situation and help you find the best solution for your needs. At the end of the day, when it comes to term vs. universal coverage, as long as you choose a policy that is best for your needs, you'll be on the right track.
Title: Do You Need Life Insurance?
Do You Need Life Insurance? [ARTICLE START]
If you're like most people, then when someone asks "Do I need life insurance?" your answer is probably going to be an unequivocal "yes. You definitely need life insurance."
This is a perfectly understandable answer, and one that you are likely to have given many times – but it is also wrong.
The truth is that everyone needs life insurance. No matter your age, where you live, what financial status you're in or how healthy and wealthy you think you are – chances are that if your family doesn't already have enough money saved up for the kind of living expenses and financial needs that typically come up after your death – there's a pretty good chance that they won't be able to make ends meet without the help of life insurance.
And yet many people never even bother to take advantage of this free resource when they can get it.
The reasons for this are fairly simple: most people lack a basic understanding of the true purpose of life insurance, and as a result they don't have any real idea of what it is that they should be looking for from an insurance company.
But before you can begin to get the kind of life insurance policy that will really benefit you – whether you're a high income earner or a low income earner – it is absolutely critical that you understand why life insurance is so important, how much coverage you need, and what kind of benefits and features are really worth your while in order to maximize your investment.
And it is with a full understanding of these very important questions that you can set about the process of finding reliable life insurance coverage for your specific needs.
Why is life insurance so important?
The first and most important question to be answered, before you can even begin to answer the question "how much insurance do I need?" or "which policy is best for me?" or any other related question, is exactly why you need a life insurance plan in the first place.
This may seem like a silly question – almost like one of those rhetorical questions where you already know the answer and are just making conversation.
Conclusion
You're right – you already know this! We all do.
But for some reason, many people overlook the fact that everything and everyone on this planet needs insurance of some kind to help provide against risk – whether it's for a short period of time or over a longer period of time.
This is true even when we are talking about very unlikely scenarios. Life insurance is essential, for example, even if you've got tons of money in the bank because you know that tomorrow your house could be underwater and your retirement accounts could be empty if something happens at work.