There are two main categories of life insurance for you to consider when purchasing this important coverage. The first category is called term life insurance as it covers a specific period of time measured in years. The second category is named universal life insurance as, assuming the policy doesn’t lapse, it continues until your death. This article explains the differences between the two types of policies and why each might be best for an individual’s or family’s needs.
It’s important for you to take into consideration your own financial needs as well as those of your dependents when deciding between these two categories of life insurance. Life insurance can be a powerful tool for providing financial security for your loved ones, leaving a legacy, or fulfilling certain financial strategies.
Term Life Insurance
The Terms of Coverage
A term life policy is a type of insurance that lasts for a specific amount of time. The usual number of years that these types of policies are set up for are 10, 15, 20, 25, or 30 years. They will pay out the face amount of the policy to the beneficiaries named on the policy in the event that you were to die. One of the main benefits of a term life insurance policy is that the annual premiums are less than that of universal life insurance policies and so are more affordable.
Once a term life insurance policy is set to expire it can be continued but the terms of the policy can be changed by the life insurance company. This typically means higher premiums as you are that many years older and so more likely to die then when you purchased the policy. While the policy is in force, up through its date of expiration, you will pay the same premium year to year.
Why Term Life Insurance Can Be A Good Choice
Term life insurance can be a good choice for many people. An example of this a married couple with children where one spouse brings in the income while the other spouse stays home. If you’re the spouse that works you want to make sure your spouse and your children are taken care of in the event of your untimely demise. People tend to buy a term life insurance policy that lasts long enough for children to get through their college years where they are no longer dependents.
Universal Life Insurance
Also called permanent life insurance, this type of policy has no expiration date. As long as the policy is kept in force by making the payments it will last as long as you do. With this type of policy, your payments are split into two parts. The first part pays for the policy itself while the second part goes into the policy’s cash value. In this way, your universal life insurance policy will gradually build a cash value that can be borrowed against or used in other ways.
Universal Life Insurance Singapore can be seen as an example for the terms of coverage and approximate cost. Like many other types of policies, this one has growth potential and flexibility built into it. This one also guarantees that your premiums are spelled out for the lifetime of the policy.
One of the things you should know about a universal life policy is that they usually offer a loan option. This means they have a living benefit for you and don’t just offer something to the beneficiaries you listed on the policy. Another article shares how these types of loans work. The cash value of the policy is what you are taking a loan against. You take out the amount of money you want, up to the cash value, and then pay the life insurance company the principal plus interest. The interest is charged because while the insurance company doesn’t have access to the cash value of your policy they are not able to invest it and make money from it.
Why You Would Consider a Universal Life Policy
An example of someone who wants a universal life insurance policy would be a married couple who earn similar incomes. They don’t necessarily depend on each other’s incomes but want to provide for each other in the event of death and/or their children as well. They also want a permanent policy that has the certainty of paying out at some point in the future. The money can be left to your surviving spouse, your children, or even a charity if you chose that as the beneficiary. Keep in mind, though, that the insurance company will pay out the death benefit listed on the policy and will keep any remaining cash value that it has.