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:
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Life Insurance to learn more. Ron King is a
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Copyright 2005 Ron King. This article may be reprinted if the
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