Making the Decision

Deciding on the wrong life insurance plan could very well leave your family without needed financial resources at one of the worst possible times.   Making the choice between TERM and UNIVERSAL life insurance policies can be a complicated and confusing ordeal.  However with just a little research and planning a responsible decision can be made.

Do You Even Need Life Insurance?
Before deciding contemplating between term and universal life coverage, you really need to determine whether or not life insurance is actually needed for your estate.

It really just comes down to a matter of money -- if death would cause any financial burden on your family at all, then life insurance is a critical need.  Financial matters to be considered include funeral costs, college tuition, and all outstanding and upcoming debts (Mortgage, Autos, Credit Cards etc.).  For a single person without any children or dependents, life insurance can be an optional.

Once you've answered Yes to needing Life Insurance and made the decision to purchase a policy, then it's time to determine what is the best kind of policy for you.  This is when you need a reputable insurance agent or financial planner who can help you deal with the details of the various benefits and costs of life insurance.

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. 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, 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.

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