You may find it worth your time to look at whole life vs universal life
You probably wonder which is best for you and your family.
Because more people are familiar with it let us take a look at the mechanics of whole life insurance policy first and find out once and for all which is best whole life or universal life insurance.
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Whole Life Insurance
I have a certain fondness for the
whole life insurance
policy because of the myriad of benefits it provides. There is the
guaranteed level death benefit that you cannot outlive.
You also have a guaranteed premium when you purchase whole life insurance. Your premium never goes up. The whole life policy has a cash value as well as a dividend if the company performs well.
The cash value is guaranteed and also earns a minimum amount of interest. Dividends are not guaranteed.
In our comparison of whole life vs universal life we must
consider that the whole life policy dividend can be used to purchase
paid up additions...which are really small paid up policies purchased
each year which are added to the base policy.
These paid up additions increase your death benefit and also have cash values. The dividend can be paid in cash or they can be used to reduce premiums.
With all these benefits when we look at whole life vs universal life we must also consider that there is a certain rigidity built into the whole life policy. That is the policy in a nutshell. It is a good policy but quite inflexible.
provides a little more flexibility than the whole life policy. Life
insurance buyers today tend to favor term life insurance. Universal life
is built on a term base.
It is basically a term policy with an added savings element. You maintain a level death benefit but you also have the option of reducing the death benefit whenever you like.
You can also increase the death benefit but you may be required to prove that you can qualify at the time you choose to make the change.
The premium you pay usually remains level but you do have the
option of reducing it. Here is where it is flexible. Let us suppose you
bought a universal life policy and you applied 30% of your yearly
premium to pay for death benefit and 70% of it to saving.
You may decide 5 or 10 years down the line that you don't need as much life insurance as you now own. You can reduce your death benefit and apply the applicable cost to your savings plan.
Let us suppose, on the other hand, you decide that that you need
additional life insurance 5 or 10 years down the line. You can reduce
the amount of premium applied to savings and use it to purchase the
additional term insurance you need.
That means there would be no need for any additional outlay in premiums. You must, however, bear in mind that you have to qualify for the additional insurance. The life insurance company may ask for a medical examination.
Whole life vs universal life...those are the basic differences.
You may add the
waiver of premium rider
to either policy. The cost for the rider for the universal life policy
is much lower than of the whole life as the premium for the rider only
applies to the portion of the premium applied to death benefit.
With the whole life policy the entire premium is waived in the event of disability.
You may also add the accidental death benefit rider to either policy.
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