The Differences Between Whole Life Insurance and Universal Life Insurance
When you are in the market to purchase new life coverage for yourself or your loved ones, you may be one of many who are confused about the different types of coverage available.
Many are drawn to whole life insurance because of its lifetime benefits and its ability to accumulate cash value, but you may be wondering how universal life insurance varies from whole life. When you learn more about the options, you can purchase coverage most suitable for your needs and budget.
Whole life insurance or universal life insurance, Which form is better?
- A whole life insurance policy is one that can generate earnings based on higher premiums than term life premiums. The return on the earnings is established by the life insurance company, and when the earnings exceed the benefits and expenses associated with the policy, the policy will begin to accumulate a cash reserve. The cash reserve may be used for a loan, to pay the policy’s premiums or accessed by surrendering the policy.
- With universal life insurance policy, the insured enjoys greater flexibility because he or she can establish the premium and death benefit. This can make it more affordable for some to purchase a whole life insurance policy. However, when this flexibility is exercised, the interest rate may adjust. This can affect how quickly cash value accumulates in the policy. When you purchase a universal life insurance policy, you may review actuarial tables and other data to customize the policy to meet your needs.
When you are shopping for whole life insurance, it is important to understand the benefits of universal life insurance. Universal coverage may yield a greater return and lower premiums. However, if the premiums are too low and interest rates adjust, the death benefit may decrease over time.
Because of this, those who are thinking about purchasing one of these policies should understand his or her goals and budget, and they should also speak with an agent in detail about the possibilities for adjustments and diminishing benefits.
You should fully understand all of the options available to you before you make a decision about coverage. This will help you to purchase the most effective policy for your needs.
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