Universal
Life vs. Term
A simple illustration can be used to show the basic difference
between Universal Life and Term Life.
Universal Life is like owning a home;
Term Life is like renting a home.
Term Life guarantees a level death benefit and level premium
for a limited time (1, 5, 10, 15, 20, 25 or 30 years). Term
Life does not build cash value, just as tenants do not build
equity in in a rented home.
Due to the low premium, Term Life allows you to purchase
the most insurance for your money.
Universal Life may guarantee a permanent death benefit and
permanent level premium.
Universal Life builds cash value just as a home builds equity.
The cash value may eventually be used to lower the premium
or to pay for education, supplement retirement, etc.
The cash value accumulates tax-deferred.
Only Universal Life and Whole
Life offer a guaranteed permanent death benefit with a
level premium.
Alternative:
Term with
ROP (Refund of Premium) is an attractive compromise*
since all premiums are refunded tax-free at the end of the
term.
* Term with ROP cannot be compared with
Universal or Whole life insurance since no cash value is accumulated
and the death benefit is only temporary. However, term with
ROP will refund all premiums paid at the end of the term.
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