Universal Life Insurance Verses Whole Life Insurance

 By: Ron.
Whole life insurances are contracts between an insurance company and a policy purchaser. You pay regular premiums to an insurance company; in the event of your death your beneficiaries will get the benefits in form of payments from the insurance company. The universal life insurance works just like the whole life insurance but it is very flexible thus somehow convenient, especially for people who are not financially stable. The universal life insurance came from the principles of the whole life insurance. Most of the rules of the whole life insurance concerning payments and death benefits were scrapped off to create the universal life insurance.

The universal life insurance is very flexible in many ways and usually has a very high cash growth unlike the whole life insurance. In the universal life insurance the death benefits increase and decrease according to the convenience of the policy holder. In whole lie insurance it is impossible to decrease the death benefits of your policy without withdrawing your current policy and starting a new one.

Premium payments in universal life insurances are also flexible, there are fixed within a range with a minimum and maximum value. The death benefit, to your beneficiaries in a whole life insurance policy is always guaranteed as long as your premium payments are up to date when you die. On the other hand, in universal life insurance policies part of the risk of maintaining the death benefit is taken up by the policy holder. In universal life insurances when the cash value of the insurance policy and the premium payments are not enough to cover all the costs of insurance the death benefit completely lapses. Your beneficiaries get nothing in the event of your death.

In whole life insurances there are hidden expenses, charges and fees such as the administration fee, mortality and expense risk charges, surrender charges and fund management fees. On the other hand all these expenses are spelled out in the universal life insurance. You now what you are getting into before getting into the contract without assumptions on some costs.

The universal life insurance policy has zero interest on loans and it also has a flexible exit procedure. It is much easier to withdraw from this kind life insurance policy as compared to the whole life insurance policy.

To decide on the life insurance policy that best suits you between the two, evaluate your needs and what you expect at the end of the day from a life insurance policy. Ask yourself some of these questions before making your choice. What are your goals with the life insurance policy you want to take? What do you have in mind for your beneficiaries in case of the death benefit? Do you prefer work on regulations or with a flexible schedule in terms of making payments?

Demand for the universal life insurance policy is becoming very common around the world due to its flexibility but there are those who prefer working on checks and regulations thus they prefer the old way of the whole life insurance policies.

Posted in: Life Insurance