Term Life or Universal Life Insurance

Term Life or Universal Life Insurance?

Choosing the right insurance plan, will leave your family with the financial protection they will need when the time is right.

The confusion starts when the decision has to be made between Term Life and Universal life Insurance. The key to successfully choosing the right plan that will protect you family in time of need is research, research, research and planning.

Someone will ask, do we really require life Insurance? Sometimes we wait so long to answer that question and plan for it, that it becomes to late when death strikes the family.

The question that has to be asked when deciding if there is a need for life insurance is, what would happen if the main family bread winner dies? Would that create financial nightmare or major burden? if the answer is yes, well, life insurance is crucial and required now rather than later. Although one would ague that for persons who are single and have no children, life insurance is optional. This is true only in some cases. What is optional is the type of life insurance that a single person would sign up for. That is because some life insurance can provide for cash accumulation and savings options, which can be used during life rather than death.

Lets examine the two main types of life insurance

Universal Life Insurance

This type of insurance provide for death benefits which is the main goal of any insurance policy. However, in addition to providing the required death benefits to living family members, it will also provide the policy holder with the advantage of having a savings account that is tax-deferred. This is what I was referring to earlier, when I indicated that insurance for a single person can be optional but advisable, especially young single persons. The reason being that after about 15-20 years of holding a universal life insurance policy a return will be realize form the savings component of this life insurance. After the established grace period, one can use this policy as collateral to borrow money, one can borrow against the policy or simple request a cash payout. Some financial gurus may argue that there are much better savings investment options that Universal Life Insurance, but the double benefits of this type of insurance makes it an attractive options that most of these gurus cannot argue against.

Term Life

Low cost and flexibility are the main attributes of term life insurance coverage. It provides basic insurance coverage for a pre-set period. But unlike Universal Life insurance, it does not carry a savings component. There will be no cashing out at the end of the term or during the the term. Premium cost for this policy is usually lower than Universal life. The term for this type of policy can span from 10 - 30 years and renewable at the end of the term. What makes this policy attractive is the low cost and flexible term periods.

When the time come to buy insurance for you or your family, it is better to select an insurance agent who comes highly recommend by a trusted friend or other family member. Insurance is a commission business and some agents simply want to get the best commission payout they can get and not necessary the best protection for you and you love ones.

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Burgess Xavier is a Health Reseacher from the Caribbean.

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