[L299]Life And Term Insurance

Universal life and term life insurances are the two most commonly used health insurance plans available in the US today. Both plans provide the necessary benefits to the surviving members in the case of an unfortunate death to meet the funeral expenses, medical bills, pending credit card bills, tax debts and residual mortgages. Every person is strongly advised to take at least one of these plans in their lifetimes so as not to be a burden on the remaining family members after death. This becomes much more important in case the dead person was the sole earning member of the family. Having coverage will ensure some relief on the financial burden to the family, though the personal loss will be irreparable.

However, making the choice between universal life and term life insurance is the most difficult part. Since both these policies have their relative merits and demerits, the confusion becomes all the more rampant. Only proper information on the two kinds of policies would help the person to make a better decision.

This article has been written to reduce the confusion in the minds of potential policyholders as regards universal life and term life policies. By knowing what these policies are about, you would be able to make your decision.

(1)Universal Life Insurance

Universal life insurance is a policy that covers for the necessary death expenses, but in addition it also provides a tax-deferred savings account. Hence this policy is called as a cash value policy. The policy would not begin paying back until at least fifteen years of its initiation; but after that there will be a steady increase in the savings account. When the policy matures, the policyholder is entitled to all those accrued bonuses. People who think of life insurance as a kind of investment are the likely buyers of this kind of policy. Though there are cynical investors who do not take the investment part of the policy in high regard; as they are of the opinion that better investment options are available in other places.

The disadvantage with the policy is that the premiums tend to be higher. But that can be considered as the money being invested. Though the premium rates are higher, they diminish with every payment made; and after a stipulated number of years, there could be no payments to make at all. Once the payments are done with, the policy remains for the entire life of the person. It does not need to be renewed; unless there is a lapse.

(2)Term Life Insurance

Term life insurance does not carry the benefits of a savings account at the end. This is a basic coverage policy which is valid for a predetermined period of time. There are no bonuses from a savings account, but the upside is that the premiums are low. This policy is good for people who have invested their money elsewhere or for those who are looking for a cheap policy.

Term life policies do not carry on till the entire life of the person. They are valid for specified periods of time, such as ten, fifteen, twenty, twenty five or thirty years. After that period, the policy provider may renew the policy. People like these policies for the flexibility they provide as regards periods of maturity. A particular period could be covered with these policies. If a couple needs a policy covering only their child's college years, then term life insurance is the best option. Thus term life insurances could be looked upon as short term policies to cater to specific needs only.

But the rates of a term life policy tend to fluctuate. The rates begin at low levels, but they would increase as the policyholder advances in years. These policies also need to be renewed and hence there are additional fees that it attracts during renewal. Sometimes the fees are so high that people do not go ahead with the renewal.