What is the relationship between the premiums of a whole life policy and the premium payment period?
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Many people can't explain the difference between whole and universal life insurance. We want you to understand, so that you can pick the policy that is right for you. Show
Understand permanent life insuranceTwo common types of permanent* life insurance policies are whole life and universal life. Differentiating the key aspects between whole life and universal life insurance can sometimes be difficult. Since both provide a financial benefit to your beneficiaries when you die, how do you decide which policy is the best choice for you? For example, do they both offer cash value that may increase over time? Is one typically more expensive than the other? What are the main differences between whole life insurance and universal life insurance? If you've been looking at buying a permanent life insurance policy, chances are you've asked the same questions. We're hoping the following information will provide you with some basic answers so you have a better understanding of the differences between whole life and universal life insurance. Whole vs. Universal: Making a permanent choiceWhole life and universal life insurance are both considered permanent policies. That means they're designed to last your entire life and won't expire after a certain period of time as long as required premiums are paid. They both have the potential to accumulate cash value over time that you may be able to borrow against tax-free, for any reason. What is whole life insurance?Whole life insurance policies have a fixed premium, meaning you pay the same amount each and every year for your coverage. Much like universal life insurance, whole life has the potential to accumulate cash value over time, creating an amount that you may be able to borrow against. A whole life insurance policy can be described as providing life insurance protection with an accumulation feature, and might be a good choice if you want a policy with:
What is universal life insurance?Universal life insurance policies offer flexible premiums that may allow you to adjust how much you'll pay each year by accessing some of the policy's cash value (though you will need to pay the minimum premium amount or the policy will lapse). Depending on your policy's potential cash value, it may be used for a premium payment, or be left alone with the potential to accumulate value over time. Potential growth in a universal life policy will vary based on the specifics of your individual policy, as well as other factors. When you buy a policy, the issuing insurance company establishes a minimum interest crediting rate as outlined in your contract. However, if the insurer's portfolio earns more than the minimum interest rate, the company may credit the excess interest to your policy. This is why universal life policies have the potential to earn more than a whole life policy some years, while in others they can earn less. A universal life insurance policy might be a good choice if you want:
The difference between whole life and universal life insuranceUniversal life insurance benefitsUniversal life can provide you with a variety of different payment options, including a flexibility of changing your death benefits, as well as the potential to accumulate cash value over time. Here's how:
Whole life insurance benefitsWhole life policies offer you a fixed level premium that won't increase, the potential to accumulate cash value over time, and a fixed death benefit for the life of the policy. In addition:
Understanding key differencesThe flexibility that a universal life policy provides is a key differentiator over whole life. Furthermore, interest rates over time can affect the performance of a universal life policy. Another key difference would be how the interest is paid. While the interest paid on universal life insurance can be subject to prevailing interest rate environments, interest on a whole life insurance policy is fixed. Some people may prefer the set death benefit, level premiums, and the potential for growth of a whole life policy. However, for those who would prefer to have more flexibility and options when it comes to their permanent life insurance, then universal life might be the better choice.
Finding the right policy for youAlthough whole and universal life policies have their own unique features and benefits, they both focus on providing your loved ones with the money they'll need when you die. By working with a qualified life insurance agent or company representative, you'll be able to select the policy that best meets your individual needs, budget, and financial goals. You can also get a free online term life quote now. *Provided required premium payments are timely made.
WEB.1468.05.15 Why is the premium paid for whole life higher than the premium paid for term life?whole life: Cost. Term life coverage is often the most affordable life insurance because it's temporary and has no cash value. Whole life insurance premiums are much higher because the coverage lasts your lifetime, and the policy grows cash value.
What is the premium payment schedule for whole life policies?Will the scheduled premium payments for whole life insurance change over time? Generally, in a traditional whole life policy, the scheduled premium payments remain level. Premiums are generally the same (fixed) every year the insured is alive. The premium payment consists of both life insurance protection and savings.
What's the difference between whole life and term life insurance?Term life insurance has a set limit of time for coverage while whole life insurance, which is known as permanent life insurance, remains in effect for your lifetime (as long as you pay your premiums). The premiums you pay for term life insurance go towards the death benefit you will leave to your beneficiaries.
Do whole life policies have increasing premiums?Do whole life insurance premiums increase over time? No, they don't – and that's the beauty of these types of policies. Whole life policies are built to have consistent premiums for as long as you have the policy.
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