Whole Life Insurance vs. Universal Life Insurance

Whole life insurance and universal life insurance are similar in some ways. Universal life insurance was born from the premise of whole life insurance. People were looking to purchase whole life insurance that was a little more flexible and the idea for universal life insurance was born.

One of the advantages of universal life insurance is the flexibility compared to whole life insurance as well as the higher likelihood for elevated cash growth if the market outperforms the insurer’s general account.

The flexibility in universal life insurance is prominent in two ways: the death benefit and the premium payments are both flexible.

The death benefit can be increased if the insured is suitable or decreased without giving up the policy or starting a new one, which is what would be required if you had a whole life insurance policy.

The premium payments can be made in a wide range with universal life insurance from a small minimum amount to a maximum amount allowed by the IRS.

The big difference between universal life insurance and whole life insurance is that with universal life insurance, the insurance company gives some of the risk of maintaining the death benefit to the person who is insured. With a whole life insurance policy, as long as you make the premium payments, the death benefit is guaranteed to be paid out when the insured person passes away. With universal life insurance, if the cash value of the policy and the premium payments aren’t enough to cover the cost of the insurance, the death benefit will lapse and no longer be available.

Whole life insurance also hides the expenses, charges and costs of insurance from the insured party, where as universal life insurance discloses this information to the policy holder.

Universal life insurance also allows flexibility to the exit strategies from the insurance contract as well as a 0 interest loan which provide the insured with access to the growth inside the policy income tax free for the time being.

Universal life insurance was created from the ideals of whole life insurance but catering to the whims of people more so than whole life can. By increasing the flexibility of the insurance policy, universal life insurance policies are growing in popularity and demand with some people.

However, there are still people who want the strict controls that whole life insurance have in place, with less flexibility that makes them stick to a certain schedule.

There is a degree of flexibility in whole life insurance but mainly only within the seven types of policies that are available, as previously discussed in this article. Some whole life insurance policies offer some flexibility to premium payments, while others do not.

The Benefits of Life Insurance

Let’s face it—most of us don’t want to think about the possibility of dying, and what might happen after we die. But if you have a partner and a family, then it’s important to ensure that they’ll be taken care of if the worst does happen. Life insurance is the best way of doing that, particularly if your partner is staying at home to take care of the children —it helps to make sure that your family won’t suffer financially from the loss of your income if you die or are involved in an accident that causes permanent disability. And even if you’re a two-income household, life insurance will help ensure that your family remains financially stable. That’s the standard benefit of life insurance, but there are others.

Dividends

Depending on the type of insurance company you choose, you can benefit from dividends while you are the owner of a policy with that company. These companies are known as mutual insurance companies, and if you have a policy with a mutual company, you are eligible to receive dividends based on the type of policy you own, and the amount of the company’s financial surplus each year. However, you are not guaranteed to receive dividends every year, nor is there a guarantee on the amount you’ll receive.

Depending on the company you have a variety of options for using dividends. You can put the money towards paying future premiums, use it to increase the value of your policy, leave it on deposit to gather interest, or you can simply take the money as cash to spend as you wish. However, note that while dividends themselves are not taxable unless the total dividends you receive are more than the total you’ve paid in premiums, the interest you earn on dividends if you leave them on deposit is taxable.

Borrowing from your Life Insurance

If your life insurance policy has cash value, you may be able to borrow against it. One of the biggest advantages of borrowing against a policy rather than simply getting a loan is that you’ll pay much lower interest.

However, there’s a downside to this that you should be aware of. If you borrow against your policy and don’t pay it back, your beneficiaries receive less money if they make a claim—so borrowing from your life insurance can be counter-productive. Borrowing against the cash value of your policy should only be done if you have a true financial emergency—and the money should be paid back into your policy as soon as possible to ensure that your beneficiaries receive the full value of the policy.

Note that you must have permanent life insurance, rather than term life insurance, to be able to borrow against it. Additionally, there is a “waiting period” between buying the policy and being eligible for borrowing against it. Even more important, if your outstanding loan balance plus interest exceeds the cash value of your policy, the policy is terminated and your coverage ends—so it’s best to be cautious about borrowing.

How does Life Insurance benefit your family?

The very best way to see how life insurance can seriously benefit your family is to see what could potentially happen to your family without it. Imagine your family after you die. Whether it is an unexpected and sudden passing or a long, drawn out affair, your family will have expenses piled up on top of their heartbreak.

If you have hospital bills when you die, your family will be responsible for paying them after you are gone, but the expenses are sure to be heavy to say the least. In addition to hospital charges, you will also incur expenses such as funeral service bills. Your family, in the midst of their grief, will be surrounded by outstretched hands waiting for their share of your money. This burden could quickly take over their lives, draining college funds, savings, and any other resources that you thought were safe and secure for your family’s future.

If this still doesn’t cover the expenses (as well as your loss of income, don’t forget) your family may be forced to sell their house, their car, and any other resources that they can afford to dump. This process is both painful and wrenching for the entire family, especially coming on the heels of the loss of a family member.

So how does life insurance protect and benefit your family? Your life insurance policy is meant to provide a buffer between your family and the expenses that will be incurred upon your death. It will not make them any less upset, however it could provide them with a barrier between the expenses incurred upon your death and the continuation of their lives. It will allow them time to grieve and hopefully move on without needing to worry how far the next paycheck will stretch or how long the savings will hold out.

Your life insurance policy could pay off your mortgage, help your children get their educations, and even allow your family to bury you in peace. It will help your family to keep their peace of mind once you are gone, and help you to live secure in the knowledge that they will be taken care of. You will find that you can sleep easier without worrying about the future of your family once you are gone.

With a life insurance policy in place to help your family, you can spend your days secure in the knowledge that your family will be taken care of after you are gone. After all, all you really want for them is to be able to go on, right? An insurance policy will ensure that they have the financial means to do so. No one can ever replace you to your family, and nothing will ease the burden of loss that is placed upon them when you die, but at least that burden will not be added to by the financial burden that you might leave behind you. Your policy can save your family’s future, and that seems like a sound investment.

Life Insurance for Women

Life insurance information tends to be targeted towards men: they are traditionally the most frequent buyers of insurance—particularly life insurance. Women need life insurance for all the same reasons men do: to replace lost income, pay a mortgage, provide money for death expenses, provide for the long-term security of family. Life insurance is protection, and most women don’t have enough of that protection. Increasing numbers of women are buying life insurance, but most women who have life insurance don’t have enough.

How much life insurance do you need? That depends on several factors, including your age, salary, and family status.

Do you need Life Insurance as a Single Woman?

Single people are much less likely to buy life insurance, believing that without dependents, it’s just not needed—and single women are less likely than any other group to have life insurance.

Single parents have an obvious need for life insurance, but what about single women without children? Even for these people, life insurance may be needed to cover loans and debts for which the responsibility may fall on other family members. Life insurance is very affordable for women who are young and healthy, particularly since at this stage of your life your life insurance needs are likely to be low.

After Marriage

After you marry or are in a long-term relationship, life insurance becomes more important, even if you don’t have children. If you and your partner own a home together, life insurance becomes even more important, and if you have children, it’s an absolute necessity. This is true whether you work in the home or out of it.

If you work outside the home, the value of life insurance is obvious. Two-income households often depend on both incomes, and if your income is lost, the financial effects could be devastating for your family.

If, on the other hand, you’re caring for your home and family full-time, you still need the protection of life insurance. The work you do in the home has a dollar value, and if you were gone your family would need to spend money on child and home care. Life insurance is the ideal way to make sure your family is cared for, whatever happens.

After Retirement

Women live longer than men: for this reason, almost 60% of American women live alone by the time they reach 85. Partly because women are unlikely to have enough life insurance for their needs (if they have insurance at all), 50% of women aged 75 or over who live alone are living in poverty. Another reason is that women are more likely to take time off work to raise children, and therefore have reduced access to Social Security after retirement.

Insurance can be an affective way of taking care of retirement expenses. It does require choosing whole or permanent life insurance rather than a term policy—this will be more expensive, but provides the advantage of accumulating cash value that the owner of the policy receives as dividends. In addition, it’s crucial to consider the effects of inflation when deciding how much life insurance to buy, as even an average inflation rate will reduce purchasing power considerably over time.

Life Insurance Extras

The types of options that a person may add onto their life insurance policy vary widely, but the common denominator is that they will increase the cost of the premiums. Yet they are usually well worth it.

One of the best known is referred to as the “Waiver of Premium” option. This allows for a waiver of premium payments for a specified time, should the policy holder be incapacitated due to an injury or illness. Since the insured party may be unable to earn an income, this protection can be a financial lifesaver, especially since it can cover family members as well. Some companies may specify conditions, such as becoming “totally” or “permanently” disabled, or may quote an age upon which this option may take affect.

Another popular extra is the Critical Illness Cover. If an individual is unable to work because of a critical illness (such as cancer), this allows part of the maturity amount to be distributed in a lump sum. It may also, occasionally, be paid out as a regular payment to mirror former income. Each policy has its own list of such illnesses, and if the patient recovers, the money does not need to be paid back. It can be purchased alone or in conjunction with whole life, term or endowment insurance.

The Accidental Death Benefit provides a large monetary coverage (up to 100% of the regular benefits) to beneficiaries, should the policy holder incur an accidental death. It can be added onto policies for spouses and children, and for a relatively modest premium, can offer up to a million dollars in coverage, in addition to the main insurance benefits.

Accelerated Death Benefits will allow the insured or their covered spouse to collect benefits if the insured is diagnosed with a terminal illness. For example, if a person is given less than a year to live, they may obtain up to 50% of their coverage, although the amount provided will decrease the total payable beneficiaries by that much upon death of the insured.

The Permanent Total Disability option provides for additional insurance benefits if the insured should suffer permanent total disability as a result of an accident or illness. This defines “permanent” as a condition that lasts at least 2 continuous years, of which there does not appear any chance of improvement or the ability to resume work.

These life insurance “extras” are just a sampling of what insurance companies may offer policy holders. They are usually called Rider Benefits because they run, or ride along, the main policy. All life insurance comparisons should include several companies, and individual situations should be discussed with qualified and experienced professionals. Some companies may include one or two options at no cost to make their policies more attractive and competitive, and this should not be construed as lessening the value of the extras in any way.

Life insurance coverage that’s appropriate for an individual and his or her family will offer peace of mind, and should be considered a top priority when planning finances.

Whole Life Insurance And Your Will

There are lots of things to think about as you are looking at life insurance issues. One of the things that you need to think about is your will and how your next of kin is represented in the will. Often the whole life insurance policy will have a person listed as the beneficiary of your money if something happens to you. However, if the life insurance policy is counted as assets, and there is someone different than your beneficiary listed as the person who gets your assets, there could be a problem with your life insurance money. Therefore, you want to be sure that as you are working with your life insurance money, you are doing all that you can to be sure that you have made your will match the information in your policy.

First of all, it is always going to be important that you have a will. You want to be sure that you have a will because this is the one way that you have to make sure you know who is going to take care of your things and who will get any of your assets when you die. Remember that you should update your will so that you will be aware of changes in your life. Remember to update your will when you get married, and be sure to update it each time you have children. You want to be sure that you are keeping your will current, so that there will not be any problems with anything after you die.

The next step is to make sure that the information in your will matches the information in your insurance policy. There are two ways to do this. One is to be sure that the name of the person or people who gets the money from your insurance policy is the same name or names that are listed in your will as the person or people who get to have your assets when you die. However, in some situations this might not be correct, because you might have different wishes for your property than for the money from your insurance policy. If this is the case, you need to keep the names in your insurance policy, and then be sure to add a note into your will that states that although someone else is the beneficiary of your will, a certain person or group of people should get the money from your insurance policy. This can help to clear up any confusion, and to let everyone know what your wishes were before you died. This is especially important if you have been married more than once and have children with different spouses. It can be very confusing for them to figure out what you intended to do with your assets and with the money from your insurance. So, if you spell it out for all of them in your will, you probably won't be having any other problems with it. That way, you can be sure that all of the money goes to the right place.

Life insurance and Marriage

One of the best times in your life should be when you decide to get married. This is going to be the time in your life when everything falls into place and you will find that you are able to be very happy with the way that your life is at that moment. When you are looking at life insurance and marriage, there are some things to think about.

First of all life insurance is supposed to cover your spouse and your children if something happens to you. However, if you buy the policy before you are married, your spouse and children might not be listed as the beneficiaries of them money. Therefore, when you get married, you need to contact your insurance company and make sure that your spouse and children will be getting the money from the life insurance policy if something happens to you. This way you will know for sure that if something happens to you, your spouse and children will be protected and taken care of. This is usually something very important to remember because it is what allows you to have the peace of mind that life insurance policies should bring.

The other thing to think about is adding your spouse onto your policy if you already have one when you are married. Most of the life insurance policies will allow you to do this. This can be good because then whether something happens to you, or to your spouse, the money from the life insurance policy will be there for the one that is remaining and the children. Also, if something happens to both of you, you can know for sure that your children will be protected.

If you don't have a life insurance policy before you get married, then you and your spouse can take out one together. This is a good idea because it can be very important for both of you, especially when you have children. You need to be sure that you are able to do all you can to protect one another once you are married, and when you have kids you will need to be even more sure that you are able to protect those children. If you don't have a policy when you get married, there are lots of things to think about.

How much would you like to spend on the policy and how long do you want to spend paying for it?

How much should the policy cover?

You might want to think about getting the type of life insurance policy that you can take later and change to other investments if you would like to do so. This might be good for you because as a young couple it is often hard to tell where your needs will be several years from the time that you get married. The type of life insurance policy that can be either adjusted or that you can change into something else as you get older is always a good idea for this type of situation with your spouse.