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Home » Insurance
Comparing Term Life, Whole Life, and Universal Life Insurance
Category :- Insurance

Author :- Steve Davids 
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Posted on October 17, 2017, 12:48 pm
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When looking for life insurance, determining which type best suits your needs can be a dilemma: term, whole life or universal life. To help you make the best choice, we’ve described each one below. Read on!

Term & Permanent Life Insurance

Basically, life protection can be represented as coverage for your whole lifespan, which is called permanent life insurance, or it can be segmented into several separate periods of time, which is called term life insurance. Permanent insurance can be also divided into whole life insurance and universal life insurance. Each type of protection grants its holder with very good perks, but they have some drawbacks, too.

Who Chooses These Types of Insurance, and Why?

Universal Policy:

Being a permanent life protection, this type of insurance covers your whole life and also offers fund accumulation, which you can use for your own benefit. People who choose universal life insurance find this feature particularly useful when covering premiums and policy fees with accumulated value. It also comes to a good use in the case of unplanned expenses or if you are currently unemployed or unable to work.

Whole Life Insurance:

Individuals who choose whole life protection are freed from the liability of managing investments, passing this task to their insurance provider. However, the policyholders typically pay high premiums, which tend to come on par with term insurance premiums over the long term (the term gets more expensive with age). The policy also allows fund accumulation from which one can borrow. In the event of the policyholder’s death, these funds are passed over to their family members or any other beneficiary. The value, obtained by the beneficiary, is completely at their disposal and can be used as they choose.

Term Life Policy:

People usually choose this policy to ensure the financial protection of their family in the case of a possible risk that they know can occur in the near future. Another upside of term life protection is its low premiums, which are significantly cheaper than permanent policies’ premiums. Some individuals who prefer to make investments by themselves or via intermediaries of their choice, but not through the insurance company, often choose in favor of this type of policy.

What Difference in Rates to Expect From These Policies?

Term Life Protection:

As was pointed out before, this type of insurance is very cheap. In fact, it is the cheapest one among all three. Such a favourable price can be explained by a short term of coverage and absence of fund accumulation. Keep in mind that term life insurance requires renewal, and that your premium, and your risks, increase with age.

Universal Insurance:

Universal life insurance costs a little more than term life insurance, but it has its own advantages. Besides the fund accumulation possibility, the policyholder can change the amount of payment for premiums as they prefer. This actually has a significant impact on how fast their accumulation funds will grow, as well as their coverage. Unlike term insurance, universal life protection does not have a guaranteed rise in premiums since its cost fully depends on how much you pay for it.

Whole Life Insurance:

The cost for this type of life insurance is exponentially larger than for term life and universal life protection. However, if you value stability, it will be perfect for you; your premiums will not rise with time because you will not need to renew the policy (as in the case of a term life policy), and the premiums will not be as arbitrary because they can be with universal insurance. Another benefit is that the policy allows for fund accumulation.

Terms of Coverage for Different Types of Life Insurance

Whole Life Policy:

You probably noticed that the main distinguishable feature of each insurance policy is its duration. Whole life insurance covers the holder for their whole lifespan (until they pass away). Coverage, however, is not provided if premiums are not paid on a regular basis.

Universal Life Protection:

The coverage is the same as the whole life policy – universal insurance covers the whole life of a policyholder on the condition of regular fee payment.

Term Life Insurance:

You can choose the period of life coverage with this type of insurance.  For example, you can purchase a Term 20, which will provide coverage for as long as 20 years. Naturally, the price for different terms is different – the longer it is, the more you pay for it. Also, do not forget about the role of age here; the younger you are, the cheaper the insurance. If you are 65 and older, chances are you will not get traditional coverage because your age will mean a higher risk for an insurance company (simplified and guaranteed issue policies, however, may be an option).

What Insurance Product Does Each Policy Provide?

Universal Policy:

This life insurance type combines two main components that constitute the insurance product, which are: insurance per se, that is protection of policyholder’s life; and fund accumulation, or, in other words, savings. You can pay enough to cover the premiums or more to build up a fund that you will be able to use later. In addition, the policy suggests a variety of investment options with high and low risks.

Term Life Protection:

Term life insurance does not work as any permanent life policy in terms of fund increases. This means that the policy suggests only life protection for the term you and your insurance provider agreed upon. Nevertheless, this policy is the simplest one and the easiest to get.

Whole Life Insurance:

Similar to universal life protection, this type of insurance has protection and savings components. Your insurance provider decides for you where your investments should be made, and the interests on these investments are usually adjusted every year.

Approaches to Policy Renewal Depending on the Insurance

Whole Life Policy:

Considering the fact that this type of insurance provides coverage for the whole lifespan of the policyholder, it does not require renewal.

Universal Life Insurance:

Universal insurance does not need renewal. However, the policyholder can adjust their rates as they want.

Term Life Policy:

Term life insurance requires renewal, and there are two ways to go about it. First, the policy can be renewed at a standard rate, which will increase with your age. Second, you can renew the policy at a previously determined rate if you buy the term life insurance renewable option.

Conclusion

Choose the policy that best suits your needs and financial situation. If the idea of purchasing permanent insurance does not appeal to you, but you still want to protect your whole life, there is an option of Term 100, which covers your life for 100 years.

If you face difficulties getting a life insurance policy due to existing health issues or a history of health pre‑conditions, or for any other reason, you can always choose to get life insurance without a health exam (also known as no medical insurance). This type of insurance has term and permanent life policies. Contact your broker, insurance agent, or the service centre of an insurance company that provides no medical life insurance to learn more about this option.


Site (source)  : https://nomedicallifeinsurance.ca/
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