Term Life, Universal Life, What Does it all Mean?

Written by Tracy Paige on February 4, 2010 & Posted in Life Insurance

If you are shopping for life insurance you have probably seen many different policy types. The main policy types are term life insurance and whole life insurance.

Term Life Insurance

Typically, term life insurance is the cheapest form of life insurance--this policy provides the most coverage for the smallest amount of premium dollars.

Term life insurance provides a set amount of insurance coverage for a specified number of years. For example, a policy might have a $250,000 death benefit for a 10-year term. This means that if you pass away sometime within the term period, 10 years in this case, your beneficiaries receive $250,000.

According to the Insurance Information Institute, 97% of the term life policies issued are level term policies. These policies have a level, or set, face value and premium amount for the life of the policy. Meaning, the insurance policy provides your beneficiaries with the same amount of insurance coverage, with a set payment amount, for the entire term of the policy.

By filling out the form above you can be matched to life insurance companies to find the right price for you.

Whole Life Insurance

Similar to term life insurance, a whole life policy provides a beneficiary with a death benefit should the policyholder die.

Whole life insurance is also called permanent life insurance. Other features of whole life insurance, include insurance coverage for your entire life (as long as you make all premium payments), and cash value.

Cash value, the investment portion of whole life insurance, accumulates through your premium payments. A portion of your premiums, plus interest, builds over the course of your policy. You can access the cash value by taking a loan (with a pre-determined interest rate) against your cash value. However, any unpaid loans are deducted from the death benefit. You can also use cash value to cover future premium payments.

Sometimes your life insurance company may issue you a dividend. There are several ways you can use this benefit. You could receive your dividend in the form of cash, or you may purchase additional insurance coverage, or you could use dividends to cover premium payments.

Compare Quotes

When you are looking for insurance coverage, be sure to get quotes from a variety of life insurance companies. This may allow you to get the best deal on the policy you choose. To be matched to life insurance companies fill out the form above.




About the Author

Tracy Paige is the Treasurer of a non-profit organization. She is also a multimedia specialist for an e-learning company. Tracy's experience includes banking and years of business management. She holds a bachelor's degree in Business, specialized in Finance.


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