The insurance market today has many options that are geared towards addressing numerous needs for individuals and families considering life insurance.
Whole life and universal life are two popular permanent life insurance products to choose from and it’s important that you understand the advantages and disadvantages to both types.
The products under these two umbrellas address a need for lifelong coverage as opposed to the temporary “term” coverage, which protects a policyholder for a certain number of years (typically between 10-30), upon which time it may continue as a very expensive annual renewable term policy.
Rather than face the high costs of annual renewable term, forgetting to move to a permanent policy during a term’s conversion period, or face much higher premiums at the expiration of a term policy, whole life and universal life allow clients to receive a policy with premiums based on their current age and health factors, such as if you suffer from diabetes, or being heavily overweight.
Whole life insurance policies have a good reputation because of their connection with dividend-paying insurance carriers, so the cash value within the policy builds in a relatively low-risk fashion. These funds are then available for the policy holder to borrow against, but one of the downsides is the importance of following strict carrier rules about when and how much money can be borrowed- those who deviate may wind up owing taxes.
One of the biggest appeals of whole life insurance is a consistent premium. Since whole life insurance is structured in this “lifelong” manner, clients who maintain their policies for longer than 20 years will reap the most benefits in cash value.
Universal life offers the same “lifelong” protection as whole life, but policies come with flexible features that interest clients who want some customization. For example, the face amount of the policy can typically be increased or decreased over the life of the policy. Rather than just the traditional level death benefit offered by whole life, policyholders can also elect an increasing death benefit, which factors in the face value of the policy as well as the accumulated cash value.
Premium payment options for amount and frequency allow for further flexibility. If the policyholder becomes unable to pay the premium for a short period of time, the accumulated cash value can cover that premium amount. If that cash value becomes depleted however, the policy may be in danger of lapsing.
The main difference between the two types of policies is that accumulation in a whole life policy is guaranteed, whereas the performance of a universal life policy can depend. Interest rates for a universal life policy are usually adjusted on a monthly basis as opposed to the annual readjustment of whole life. For those who prefer a little bit more involvement in their policy, universal life offers flexibility as well as cash value accumulation. The protection offered by these policies can interest a broad range of potential policyholders.
The Importance of Life Insurance and how much you need
Finding the perfect life insurance plan is vital for you and your family. Choosing between whole life vs term life, or universal, it’s important that you have adequate coverage from a reputable life insurance company.
Making important decisions are tough, and purchasing life insurance is definitely one of them. What would happen today if you passed away, you would probably leave your family with some serious debt. Mortgage payments, funeral expenses, car payments, and so much more. All of these expenses can leave your family with a mountain of bills that they can’t pay for. Having a life insurance policy can gibe your family the resources they need to get through this difficult time without having any added financial strain. Don’t let your grieving family have to worry about how they will cover the mortgage or a funeral.
After you decide which type of insurance policy you’re going to buy, you have to decide how large of a policy you’re going to need, and look at your financial situation to determine that. The first thing, as we mentioned early, is how much debt would you leave for your family? Make sure that your policy is at least big enough that your family would be able to pay off any final expenses. Sit down and calculate all of your debt and debt that you may have in the future, this number is a great starting point for your policy.
A goal you should set with purchasing life insurance is income protection. Once you or the insured has passed the family loses the potential income that would’ve been earned. Wouldn’t you want your face value to reflect a few years of would be salary? We think its valuable to use your current income and multiply it by a few years, 3, 5 or 7. While the perfect number hasn’t been found yet, its always a good idea to keep this in the back of your mind as you shop for policies.
Getting Lower Insurance Rates
Most people are surprised to see how inexpensive their monthly premiums are. We love letting people know the ways to save money on your life insurance rates. Always compare quotes from multiple companies before you pick one. Each company has a different rating system, which means that each applicant will be looked at differently.
We work hard to save you the time and frustration so that your day isn’t filled with speaking to numerous companies and brokers. Fill out the quote form on the side and the best life insurance rates will come to you. You won’t have to keep answering the same questions to a dozen different agents.
Aside from getting quotes from different companies, improving your health can drastically lower your rates. How healthy you are is usually number one in causes of concern from the carriers. After the application, the company will send out a paramedic or nurse to complete a health exam. The results of the health exam could either save you money or cause your fees to go through the roof.
Two of the best things you can do with your health and your life insurance policy is to quit smoking and lose weight. Smoking cigarettes will cause your life insurance premiums to double or triple automatically. Even if you’re in perfect health, using tobacco will break your bank.
Additionally, being overweight isn’t only bad for your health but also bad for your bank account. The more excess weight that you carry, the higher your risk for having health complications, which will translate into more risk and higher premiums.
Whole Life vs. Universal Life
As you can see, both types of policies have pros and cons. There is no life insurance policy that works perfectly for everyone. Take a look at your specific situation and decide which type will fit your needs best. The most important part is that you have life insurance, regardless of which type it is.