Term, Universal, All - What Is Best For You?

In considering whether to buy life insurance, most will focus on how much insurance to buy. We find out what kind of insurance to protect your family is also an important part of decision making. However, to determine the differences between term life, universal and everyone can be very confusing and difficult.

Term Life

If the need is temporary life insurance, life insurance should be considered. Life insurance is usually offered is renewable once a year, where the premium is very low in the early years, but increases at an increasing rate each year, eventually become unaffordable at some point in the future. Or, at a level where, for example, the premium is the level of the first 10 years, then jump in 11 years and remains in another 10 years. However, usually find that after about 20 years, the premium is very high. Term level is usually offered with periods of coverage level of 10, 15, 20 or 30 years. With 20 and 30 at the end of the year, after the initial level (20 or 30 years), the premium will be extraordinarily high. If the economic loss is no longer valid after the original level and the high premium in recent years is not a problem.

Universal Life

Universal life insurance is a form of permanent insurance with the reward for the original / should be the level of residual life of the insured. Universal life is based on the present value of the policy owner can be reached. The main advantage of the Universal Life is its flexibility. Universal life premiums are flexible, can be paid or not, the owner may pay more or less than what the advertisements called for the award. This allows the owner to provide money based on the current situation. If cash flow is good, can cost more to build in cash plus or minimize the contributions later. If cash flow is poor, it can ignore the commission, or to pay less. Interest on the cash value varies. It is a minimum interest rate (usually 3%), and the number usually increases and decreases of about 12-18 months behind the current long-term bond prices. Flexibility, however, is that some owners may be in political trouble.

Whole Life

Whole life insurance is a form of permanent life insurance offers many guarantees the contractor. As long as the required premium is paid, the insurance company guarantees that the policy is in effect when the insured dies. Most of the quality of all life insurance companies also guarantees growing cash value and dividend payments are not guaranteed. Secured and unsecured portions of the cash value can be accessed by the policyholder.

All of life is not as flexible as the universal life, but is usually more stable. Universal Life generally less expensive than whole life, but the risk shifts from the political to the owner because there is no guarantee. Term life insurance is the cheapest life insurance, but has a risk that is too expensive, and when you want it in subsequent years.

Lorin Greber, CFP, ChFC is a financial advisor with the group's financial stability, LLC in Rockville, in partnership with small business owners, professionals and wealthy retirees around the country, MD. In the current economic environment, focusing on using life insurance as a planning tool only makes sense for customers seeking to create real wealth.