What is the difference between term and universal life insurance?

Life Insurance
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Term insurance provides life insurance coverage for a particular period of time for a specified premium. For example, a $100,000 20-year term policy for an annual premium of $1,000 is a contract that allows you to protect your beneficiaries for the next 20 years. At the end of 20 years, the coverage either ends, or you can continue the coverage at a much higher premium.

Universal life insurance is a form of "permanent"  lifetime insurance. You'll pay a higher premium for that $100,000, but you'll have so much more flexibility. The insurance company will create a "cash value" account in this policy, and offer a guaranteed minimum interest rate on the growth. Part of your premium is used to pay for the annual cost of insurance, and the other part goes into a growing cash account that you can access at any time. Other benefits include:

1)  Adjustable coverage, so you can increase or decrease the death benefit as your needs change.

2)  Flexible payment options, so you'll be able to increase, decrease, or even stop your premium payments as your circumstances change.

3)  Growing cash value, so you'll have a "bank account" inside your policy that you can access for emergencies, college expenses, supplemental retirement income, or any other cash needs you may have.

Hope this helps. Good luck!   

5 weeks ago
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September 2004
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