Thank you for your question about life insurance. Comparing different policies is confusing and complicated.
You have presented two choices, which are essentially two different products. One allows for a savings or investment plans together with an insurance covering death (universal life policy) and the other only covers in case of death.
Life insurance is an important financial tool to help you control risks and protect your family's income and asset position. Here are some of the main reasons you might be considering insurance:
- Pay off debt in case of death
- Allow for your survivors to maintain their life style
- Maintain savings for your retirement
- Keep a supplemental investment to help pay for college,
Some of your reasons deal with helping your family after your death (term insurance) and some are to help your income flow through investments and savings (permanent life insurance including universal life insurance)
In order to help you make a decision learn about:
- Different types of policies
- Different companies
- Different Requirements
Choosing a Life Insurance Policy
Life Insurance policies are chosen for different reasons, which affect the type of policy that is preferable for your situation. The two basic types of insurance policies are:
Term Life Insurance: Term insurance pays out to the beneficiary in the case of death of the policy owner. This is the cheapest type of life insurance, because once you stop making payments there are no benefits. Like all life insurance, the premium you pay is based on your age, the older you are the higher the premium. One common reason people take out term life insurance is to cover a large debt, such as a mortgage, in the case of the borrower's death. The borrower ensures that the family will not be burdened with monthly payments, or a large debt, in the case of their death. Once you stop making the payments all of your benefits are terminated.
Permanent Life Insurance: Permanent Life Insurance policy includes an investment or savings element in the policy in addition to term insurance. Two types of permanent life insurance policy are:
- Universal life policy: Through a flexible payment and premium schedule, you can change your term death benefits and the amount of savings.
- Whole life policy: You can build long-term savings and insurance plans through stable (based on age) premiums and payments and a guaranteed return.
Life Insurance - Different Requirements
Life Insurance is based on different factors including age, gender and health. In most cases, the insurance company will ask you regarding your health condition and whether you smoke. If you have any serious medical issues, raise that with the agent or salesperson. Certain conditions affect the type of coverage.
Depending on the type, the amount, and the length of the insurance policy you may be required to have a physical exam. Medical exams are frequently required and involve basic blood tests. Some types of insurance, such as simplified term insurance do not require medical exams. Always fill out accurate information.
Life Insurance - Different Companies
Dependability of your insurance company depends on two factors:
- Getting the right type of insurance: Insurance premiums, requirements, and payments are complicated. Getting the type of policy, which meets your goals and budget, is not easy.Make sure that you understand what the policy covers and how much it costs. If you don't understand, then ask again.
- Making sure the company can pay out: Your insurance policy is not guaranteed, but most policies are issued by large insurance companies, such as Prudential and AAA. Check online for more information about insurance companies. When choosing a company, either through an on-line site or through an insurance agent, remember that your investment is not FDIC guaranteed.
I recommend that you take these steps:
- Determine if you need term insurance to cover a sum of money in case of death, or do you want to use insurance as an investment vehicle.
- Is 10-year period a long enough time to cover you needs? If you want to renew your policy in 10 years, you will have an extremely high premium.
- Shop around for a good quote that covers your needs. Don't take on larger amounts and high monthly payments that you cannot afford.
I hope this information helps you Find. Learn & Save.