What Are The Differences Between Term Life, Whole Life, And Universal Life?

Purchasing Life Insurance in Sarasota FL can be a complicated process, and most people don’t understand exactly how insurance works. When customers are offered a choice between term life, whole life, and universal life, many don’t know how to choose. The following is a brief explanation of these three types of life insurance along with some recommendations for choosing between them.

What Is Term Life?

Term life is an insurance policy that covers a set number of years. A person might buy a term life policy for 20 years, for example. If he or she dies during that time, then the beneficiary will receive a guaranteed death benefit. However, if the person dies after the 20 years have passed, no benefit will be paid unless the policy has been extended. Because term life is less expensive than other types of insurance, it can be a good choice for a person who is young and healthy. People may also add a term life policy to cover the years that their children are in college or some other limited expense.

What Is Whole Life?

A whole life policy endures for the entire life of the policy owner. It’s more expensive than term life, but it also offers more benefits in that it accrues a cash value over time. Policy owners can borrow or withdraw from the cash value, but if they allow it to keep growing, the final payoff to the beneficiary can be much higher than a term life benefit. Another feature of this type of insurance is that premiums are based on the health of the policy owner at the time of purchase. Thus a young, healthy person will pay lower premiums for life than someone who purchases a policy later in life.

What Is Universal Life?

A universal life policy is a combination of an insurance policy and an investment. With this type of policy, the owner pays more than the cost of the insurance each month, and the extra goes into the stock market. If the market performs well, then the policy owner has the opportunity to increase his or her wealth. Another benefit of a universal life policy is its flexibility – owners can change the amount of the benefit, increase premium payments, or use accumulated value to pay premiums.

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