The name of this site is etermlifeinsurancequote.com for a reason…term is the most affordable way to insure against the risks that accompany someone passing away early. This begs the question…what about the main alternative, whole life insurance? That’s a good question and it’s really the first question to answer in order to make an informed decision. Let’s look a little closer at how whole life insurance works (and doesn’t).

Whole life is exactly what it says. The protection of whole life will continue as long as the premium is paid (whether by you or by the policies cash value/dividend). You are protecting the insured for his/her entire lifetime. Suffice it to say, whole life policies always pay out. There will always be a benefit paid regardless of whether a person passes away tomorrow or at age 90. To many people, this a reassuring thought and addresses the most common misunderstanding of insurance…”What if don’t pass away during the period of term life I purchased and I paid all that money?”. This is akin to the “What if I never get sick” argument with health insurance and it shows a critical misunderstanding of how insurance works and our views of risk and probability. Read that last sentence over and the let’s look at how the life insurance companies came up with a way to satisfy this basic fear much to their financial benefit…whole life insurance.

So you’re now a life insurance executive in charge of new plans for the company. There’s plenty of jokes I can enter here but it’s too easy so we’ll move on. People in marketing are telling you about this strange fact that people like to get something for money they pay and a lot of the population doesn’t purchase life insurance because they very well may not get anything. Even though those people know the risk of going without, they can’t get past paying money now for some possible benefit in the future. There’s a disconnect. Voila…whole life insurance. You pitch it to the company and they think you’re crazy. “We can’t insure against a risk that has a 100% chance of happening…we’ll either have to charge the full amount (plus profit, overhead, inflation, etc) or go broke!” Well, let’s just say the carrier didn’t go broke by selling whole life insurance. In fact, it’s one of their most profitable types of insurance and life insurance brokers are pretty excited to show you whole life as well. Perhaps they just all feel it’s a better product or maybe they understand that some people will go without life insurance all together if there isn’t something more tangible for the money they pay. You may agree with this but understand that you are paying significantly to do so.

How does the company 1) offer whole life considering the fact they will have to pay out and 2) attract people to purchase whole life due to the cost resulting from item 1? To answer question #1, the carrier has to charge considerably more money to offer whole life. You can think of it this way. Let’s look at $100K benefit. One way to think of it is that they will charge you $100K plus a certain percentage to cover profit, overhead, inflation, cash value (we’ll discuss later) over your statistically expected remaining years. That’s a lot of money you have to pay and this is the reason whole life is so much more expensive than term. To some extent, you’re paying a dollar to get a dollar (actually less than).

As to question 2, how does the carrier attract people to buy this much more expensive life insurance policy? The first way goes to the disconnect that caused the company to create whole life in the beginning. The guarantee of a benefit. “Why would you pay money and get nothing in return with term” is likely the pitch. But they need more to “sweeten” the deal. What if your policy builds up a cash value that you own. We’ll take some of the extra premium and give it back to you over the course of the policy. At some point, the cash value and/or dividends can even pay the premium of the policy. Now, people are satisfied. Yes, they are paying a lot more but they will get some of back. The problem is that they will get a lot less of it back than they pay relative to the cost of term life.

If you’re absolutely adamant about the “whole life” length of protection for whole life, then by all means. We can help you in this regard. We just think it’s important to get an impartial understanding of what you are paying for. Insurance, at it’s core, is about insuring the probability of a risk. Anything that strays from this framework quickly approaches something else and usually at your expense.

Dennis Jarvis is a licensed insurance agent concentrating on term life insurance. Shop, compare, and instantly quote multiple carriers with professional guidance and resources.

One of the most important things you can do as parents is to ensure the financial welfare of your children in the event of your death. Life insurance is the best way to be rest assured that your children will be taken care of if you die. Although we never like to think of that kind of thing happening, but it does.
What is Life Insurance
Life insurance is a policy that you can enter with your insurance company, which promises a certain amount to your beneficiary(ies) in the event of your death. Usually, a spouse will name the other spouse as well as their children as beneficiaries of the policy. As part of the agreement with life insurance, your insurance policy will be a monetary value, that you will in return, pay a monthly premium for. Premiums usually depend on your age, gender, occupation, medical history and other factors.
There are other types of life insurance that may provide benefits for you and for your family while you are still living. These policies can accrue a cash value on a tax-deferred basis and can be used for future needs such as retirement or your child’s education.
Do I Need Life Insurance
Earning an income allows you and your family to do many things. It pays for your mortgage, buys cars, food, clothing, vacations and many other luxuries that you and your family enjoy. However, certain situations can cause you to lose your income, and those who depend on you also depend on your income. If any of the following statements about you and your family are true, then it is probably a good idea for you to consider life insurance.
1) You are married and have a spouse.
2) You have children who are dependent on you.
3) You have a parent or relative who is aging, or disable and depends on you.
4) You have a loved one in your life that you wish to provide for.
5) Your 401K retirement plan, pension and savings aren’t enough to insure your loved one’s future.
What Are My Life Insurance Options
There are four basic types of life insurance that can meet you and your family’s needs:
Term Life Insurance
This is the least expensive type of life insurance coverage, and at least at the beginning, the simplest. Term life insurance policies do not accrue cash value, and are fixed over an extended period of time – usually one to 0 years, and they can be renewed. This life insurance policy pays the beneficiary of your policy a fixed amount in the even that you die in the period of time that your policy includes. The premiums of term life insurance are lowest when you are young and increase as you get older
Whole Life Insurance
This type of life insurance is similar to term life insurance, as well as provides cash value. Over time, whole life insurance generally builds up a cash value on a tax-deferred basis, and some even pay it’s policy holders a dividend. This type of life insurance is popular, doe to the cash value that is accessible to you or your beneficiaries before you die. Used to supplement retirement funds, or to pay for your child’s education, whole life insurance should be used for protection, rather than for accumulation.
Universal Life Insurance
This type of life insurance is a flexible kind of plan. These policies accrue interest and allow the owner to adjust the death benefits and premiums to their current life situation. You decide the amount of premium for universal life insurance, and of you skip a payment, this will be deducted from your death benefit. Universal life insurance stays in effect as long as your cash value can cover the costs of the policy. These rates are subject to change, but they can never fall below the minimum rate that is guaranteed when you sign up for universal life insurance.
Variable Life Insurance
This type of life insurance is designed for people who want to tie the performance of their life insurance policy to that of the financial market. The policy holder gets to decide how the money should be invested, and your cash value has the opportunity to grow more rapidly. However, if the market is poor, your life insurance policy’s death benefit will be poor. As with whole life insurance and universal life insurance, you may withdraw against the cash value. Be reminded that withdrawals of this life insurance policy will be deducted from the cash value.
How Can I Save Money With Life Insurance
Below you will find some suggestions on ways to save money while purchasing the life insurance policy that is right for you.
1) If you don’t need life insurance, don’t buy it. Don’t buy more insurance that you actually need in order to provide financial security for your family.
2) Shop around for competitively-priced life insurance policies while you are healthy. Don’t smoke, or do anything that might increase your rates. Take care of yourself by exercising regularly and maintaining a moderate and healthy weight.
3) If you purchase a term life insurance policy, look for guaranteed and renewable policies. That way you won’t have to periodically continue to shop around for those life insurance policies.
4) You should only buy optional forms of coverage such as riders only if necessary.
5) Shop around and compare life insurance policy rates and coverage. There are thousands of life insurance companies to choose from. It is advised that you get at least three separate quotations of life insurance, and then decide which is the best for you.
Brian M. Gardner is the Founder of Financial-Articles.com – An Online Money Making Resource. Learn how to make money and acquire wealth by investing in stocks and mutual funds, as well as how to be successful in sales, marketing and advertising.
Visit Brian’s website at http://www.financial-articles.com.

f you’re shopping for life insurance long enough, you’re bound to come across the term cash value. It’s typically a function of how whole life insurance is designed. As we discussed in our whole life insurance article, the cash value bell and whistle may be just that but it’s important to dig a little deeper and understand how it works and why it’s a part of life insurance policies at all. Let’s look closer at the cash value component of whole life.

My father-in-law was an old New York Life agent right out of college. He’s been an insurance broker (now independent) for more than 40 years now. That’s persistence! His daughter (my wife) has some small whole life insurance policies that were taken out when she was very young by her father. We still get the statements which run through the premium paid, life benefit, and….whole life cash value. She’s had the policy for years (decades) now and that cash value amount is not that great. What is it and why is it even there?

When you buy a whole life policy, a small percentage of your premium will go towards your policies cash value which is similar to an account you have within you life policy. It is your asset and you can even borrow against it. If the amount becomes high enough, you may be able to pay the premium with the interest or dividend that this amount earns. In our opinion, it amounts to an expensive savings account built right into your policy which begs the question…why have it at all. Why not charge less money for the life insurance premium and skip this whole cash value step all together?

First, the cynical view. Whole life insurance is quite a bit more expensive than term life and people have trouble departing with money. If you can tell someone comparing life insurance plans that some of the premium will be given back to them in the form of cash values accumulating in the policy, it makes parting a little easier. You can even say that at some point in the future, the cash value will high enough to pay the premium. That sounds great when you sitting around a table contemplating a very large whole life insurance premium payment. To some extent (here comes the cynicism), why not reduce that expensive premium payment and just let a person invest or save the difference themselves? That’s wouldn’t sell many whole life policies, now would it.

Okay, we’ll assume all is right with the world and look at any positives we can find with the cash value concept. Usually, you can borrow against cash value for periods of time. You’re essentially borrowing from yourself and paying interest to yourself but that’s how it’s structured. The money that accumulates is typically tax-deferred. If a business is paying the premium, these cash value amounts borrow might not be subject to tax but ultimately, the loan should be paid back to keep the policy in good standing. Indeed, the cash value may one day be large enough to pay the premium but so might separately invested funds saved by buying term life and investing/saving the rest. The argument seems to be whether the gain is higher within the life insurance company’s control versus out (say through your bank or investment brokerage).

We don’t see how that’s possible and we’re left with the fact that cash values, dividends, and the like are just different shades of lipstick on a pig. People like to get something for money they are paying and in our opinions, cash values address this psychological need more than a financial need. If you absolutely need to have life insurance for your entire life and guarantee some benefit is paid to your loved ones then whole life might be a good fit. Just realize it comes at a cost.

Dennis Jarvis is a licensed insurance agent concentrating on term life insurance. Shop, compare, and instantly quote multiple carriers with professional guidance and resources.

If you’ve found your way here, you’ve no doubt decided you need
to purchase a new insurance policy or add to your existing level
of insurance. It can be a little confusing deciding just what
you need. So let’s cover some of the most popular types of
insurance.

Critical Illness Insurance Heart disease, stroke and cancer are
just a few of the critical illness that bring a chill to your
spine when you are diagnosed. The good news is that with the
advances with modern medicine many illness that even recently
were almost always fatal can now be treated and life goes on as
normal. However, in a worst-case scenario, critic
al illness insurance helps you cope with the expense of your
illness while you are treated and helps your loved ones to go on
unencumbered by the financial burden left by a long illness
should you lose the battle.

Disability Insurance One of the most popular forms of
supplemental insurance, Disability Insurance pays you a
percentage of your income as a benefit should you become
disabled. You use these benefits to help with out of pocket
expenses not covered by your major medical policy and to pay
your household bills while you recover from a temporary
disability or a lump sum payment or a life long benefit in the
case of a permanent disability.

When shopping for a Life Insurance quote, Term Life Insurance
and Whole Life Insurance are the two most popular choices. Let’s
explain each of these:

Whole Life Insurance When shopping for a Whole
Life Insurance quote you will find that, the policy remains
in force during your entire lifetime as long as the premiums are
paid. The type of life insurance also builds what is commonly
called a cash value that you borrow under certain circumstance
after a period of time.

Term Life Insurance When shopping for a Term Life Insurance
quote keep in mind that this insurance will cover you for a
specified time only such as five years. Your premiums do not
increase during the term of your policy but will likely increase
once it is time to renew the term. Term Life Insurance does not
build a cash value.

Term life is generally cheaper if you are younger in age and a
good starting point for a safety net for a young family until
you’re ready to invest in long-term whole life insurance.

Now you’re fully informed to make the right choices as to just
what new or additional insurance to choose for yourself and your
family.

A life settlement also known as a life insurance settlement, senior life settlement, or a senior settlement is quickly becoming a beneficial option for senior citizens across the nation. Life settlements allows senior to cash in their life insurance, but in a new way. Instead of cashing in their policy with the original life insurance company, they can work with a life settlement broker to cash in their policy with a financial institution that will pay more than their insurance company’s surrender value.
Seniors nationwide are quickly learning that surrendering their life insurance policy to their insurance company will not always reward them with the highest payment. Many insurance companies offer a low cash value and some policies don’t have cash value at all. Life Settlement brokers and companies have the ability to do a brief analysis to determine if the settlement will be greater than the cash value. Life Settlements also do not require any obligation, costs, medical exams, or hassles. Seniors can find out the true value of their policy through a Life Settlement and do not have commit to selling the policy.
The life settlement broker will take a basic application and then find out the value of the policy, if the life settlement amount is not what the senior expected or is too low, the senior does not have to move forward. There is no risk involved for the senior. Another key benefit for seniors and financial professionals utilizing a life settlement broker is the financial resources. A broker will use a handful of financial institutions and investors to find the highest payment for the policyholder. Brokers will also use the power of negotiations to the net policyholder a higher payment.
A life settlement can be a wonderful financial planning tool. It is however important to take the correct steps to receiving the highest settlement payout. The process can be completed quickly once the initial analysis has been completed on the policy and the policyholder.
Insurance agents, accountants, and financial professionals can also work with a life settlement broker to assist their clients with the process. A financial professional not offering a settlement option to a policy holder who is going to lapse or surrender their policy is not following their fiduciary duties.
Grant Shellhammer is located in sunny Orlando, FL. He is a licensed insurance agent and affliate Life Settlement Broker with Life Settlement Pro. Grant works with senior citizens and financial professionals nationwide to receive the highest available offers for their life insurance policies.
Contact details:

grant@lifesettlementpro.com

1.888.973.8377

http://www.lifesettlementpro.com

Life insurance provides money to your family or loved ones if you should die. Life insurance can also help protect the financial interests of a business if a key employee should die. Here, we will discuss the use of life insurance for your family.
Now, no one likes to think about the consequences of their death. Yet, people die of accidents and diseases every single day. Around 2.5 million people in the United States die every year. While diseases lead the list of causes, over 100,000 people die every year of accidental causes.
If you have family members that depend on your earning power, the important question you must ask yourself is, “What will happen to them if I am no longer around to provide for them?”
And, you must ask that question now, before you die of an accident or are diagnosed with a deadly disease. Once you are involved in a deadly accident, it’s to late to obtain life insurance. And, once you are diagnosed with a deadly disease it’s awfully hard to obtain life insurance.
Life insurance can protect and provide for your family in a number of ways:
- Pay off debts
- Provide care and education of your children
- Provide needed money before your spouse can make up for your lost income
=== Life Insurance Can Pay Off Debts ===
Many families live in a home with a substantial mortgage. Your mortgage typically represents your greatest debt. Your income is probably what provides the money to pay your mortgage payment. Life insurance can be used to pay off that mortgage debt if your income is lost.
Millions of families have a large credit card debt. They often cannot pay off their credit cards every month. Those families that seldom pay off their credit cards have an average debt of nearly $8,000. And, many families that declare bankruptcy have tens of thousands of dollars in credit card debt. Life insurance can be used to pay off that credit card debt.
=== Life Insurance Can Help Pay for the Care and Education of Your Children ===
If you are a family with “special needs” children, you may be paying for special tutoring or child care. These expenses will continue beyond your untimely death. Life insurance can help provide for your child’s special needs. This help could continue for quite some time.
A university education often costs $20,000 a year or more. Your savings and investments over the years could help pay that cost. But, if your income stops before those investments can grow to help your children with their education expenses, your children will have less money available to get them through their university education. Life insurance can be used to help provide the educational costs of tuition, books, fees, and living expenses.
=== Life Insurance Helps Your Spouse ===
Your spouse may or may not be able to make up for your lost income. Depending on your spouse’s age or other circumstances, your spouse may:
- Re-marry and gain another source of income.
- Wait until a pension and/or Social Security provides an additional income stream.
- Increase income from employment or entrepreneurial efforts.
Life insurance can help your spouse make the transition from the time of your death to the time of a new income stream. While life insurance sales people often want you consider your family’s lifetime income requirements, this is often beyond what is really required.
You need to consider how large an income stream your spouse needs and for how long before a successful transition to another source of income can be made. The face value of your life insurance can be tailored to help provide the income stream through this interim period.
Typically, as you become older and income from pensions and Social Security are closer at hand, your need for life insurance decreases. And, if you have built up sufficient financial resources, your need for life insurance is almost non-existent.
=== Types of Life Insurance ===
There are two basic types of life insurance:
- Term Life Insurance
- Whole Life Insurance
Term life insurance is simply a contract that calls for you to pay a premium for a certain number of years for a certain face value of life insurance. The length of the contract can vary from 1 to 30 years. If your term policy ends without your death, you receive no benefits. If you die before your policy ends, you survivors receive the full face value of the insurance.
Some term life policies are called “decreasing term” because the face value of the policy decreases over the years. Term life insurance policies are often “renewable” when they expire, allowing you to get another policy of term life insurance without a new physical examination.
Whole life insurance is a long term policy in which you pay premiums that provide for both life insurance and a “cash value” investment plan. When the policy is surrendered, it either pays the face value death benefit (if you die) or the “cash value” of the policy. Often the “cash value” of your policy is determined by a fixed rate of return on your premium payments. After some initial period, you can borrow against the cash value of the policy. The premiums for whole life insurance are higher than for term life insurance.
Whole life insurance is also offered with some variations in premium payments and face value amount. Such variable plans can be called universal life insurance, variable life insurance, or other names.
Several factors are important when considering whole life insurance. You should clearly understand:
- When Cash Value Begins to Build — Often whole life insurance policies do not allocate much of your premium to begin building a significant cash value before you’ve paid into the policy for 10 years or more.
- Rate of Return — The rate at which your policy builds cash value is often below the rate you could get if you invested elsewhere.
You should carefully investigate both term life insurance and whole life insurance plans. It is often wise to consider buying a term life insurance policy and investing the excess of what the whole life insurance policy would cost. That way you would have the benefit of both life insurance and a higher rate of return on your investments.
Overall, you should evaluate your circumstances to determine if you need life insurance. If you need life insurance you should determine how much insurance is appropriate and the type of life insurance policy that would best meet your family’s needs.
Bob Sherman is the owner of http://www.bobshermancredit.com that provides information about credit, debt, wealth building, and other financial topics. His ebook, How to End Your Credit Card Debt, is offered free to subscribers of his Credit and Debt newsletter.

Unlike term life insurance, permanent insurance policies such as universal life, variable universal life and whole life provide long-term financial protection. This type of insurance will cover you for the duration of your life and continued on time premium payments. Permanent policies provide you with not only a death benefit but in some situations a cash savings. It is because of these extra perks that permanent life insurance tends to be more expensive than term life.
Some features of permanent life insurance also include level premiums so you want to purchase this type of insurance while you are considerably young and in good health. This will help decrease the cost of your premiums.
Permanent policies can also produce dividends. You earn dividends when your premiums turn out to be higher than your actual life insurance costs. If this is the case your insurance company may opt to pay you the difference in the form of a dividend. Because it is difficult in predicting your actual costs, dividends are not guaranteed.
Guaranteed cash values are another plus to purchasing permanent life insurance. Some of the cash you pay into your policy may accumulate as a guaranteed cash value. This means if you cancel your policy these cash values become yours. Or you could simply borrow against them as a policy loan while your policy is still in effect. The actual quantity of your guaranteed cash value is dependent upon the kind of policy you purchased, its size and the length of time you’ve had it. When borrowing against your cash value you must remain cognizant of the fact that the amount you borrow will decrease your death benefit and your guaranteed cash value.
Although permanent life insurance is more expensive than term life insurance there are methods of getting the most included in your policy for the least amount of money. Don’t just purchase the first policy you are offered, as with anything else you purchase shop around for the best rates. Purchase an appropriate amount of life insurance; don’t buy an excessive amount if not absolutely necessary. As stated earlier buy insurance while you are young and in optimal health, don’t wait until you find out you have a medical condition and suddenly decide you are not invincible and may need to purchase life insurance after all. If you smoke quit, if you drink do so in moderation. If you are overweight start exercising and watch your diet. If your employer offers life insurance, take it. These group insurance plans often are much cheaper than individual policies and in most cases you may not have to submit to a physical health screening.
Timothy Gorman is a successful Webmaster and publisher of Best-Free-Insurance-Quotes.com. He provides more insurance information and offers free money saving auto, home, health and life insurance quotes that you can research in your pajamas on his website.

If you are considering purchasing life insurance, an overview of the available types should prove helpful. This article will briefly discuss the difference between whole and term life insurance, as well as some variations on whole life insurance.

The easiest way to understand the difference between whole life insurance and term life insurance is to look at what is meant by their names. When you purchase whole life insurance, you are covering your “whole” life – as long as you own the policy, it will pay a benefit when you die. What that benefit is depends on the value of the policy at the time of your death, but you own the policy even if you are no longer making payments on it. Whole life also accumulates a cash value on a tax-deferred basis. In addition, whole life can pay dividends throughout the life of the policy.

Term life insurance, on the other hand, is purchased for a certain term, or period. As long as you die within that period, term life insurance will pay an agreed upon amount to your beneficiaries. It will not pay if you cease to make payments or if you die after the term has expired. In addition, term life insurance has no cash value.

Two other aspects of whole versus term life insurance should be pointed out. The first aspect is that premiums for whole life insurance are higher to begin with, but remain steady over time. On the other hand, premiums for term life insurance are lower near the beginning of the policy, but increase over time. Another aspect is that you can borrow against the cash value of a whole life insurance policy. This is not possible with term life insurance, since it does not have a cash value. There are two variations of whole life insurance that need to be mentioned. The first is a more flexible form of whole life called universal life insurance. With universal life insurance, you can adjust (within certain limits) the premiums as well as the benefit amount over time to suit your financial situation. This is made possible by placing the premiums in a fund that accumulates based on the interest rate. As with normal whole life insurance, this type of policy has a cash value that can be borrowed against.

The second variation on whole life insurance is called variable life insurance. This type is similar to universal life insurance, except that the premiums in the fund are tied to the financial markets rather than to interest rates. While the potential for growth is greater with this type of insurance, the potential for loss is greater as well.

As you can see, there are some choices to be made when considering the purchase of a life insurance policy. Now would be a good time to use some of the other resources at this site to help you decide on the life insurance policy that is right for you and your family.

If you are considering purchasing life insurance, an overview of the available types should prove helpful. This article will briefly discuss the difference between whole and term life insurance, as well as some variations on whole life insurance.
The easiest way to understand the difference between whole life insurance and term life insurance is to look at what is meant by their names. When you purchase whole life insurance, you are covering your “whole” life – as long as you own the policy, it will pay a benefit when you die. What that benefit is depends on the value of the policy at the time of your death, but you own the policy even if you are no longer making payments on it. Whole life also accumulates a cash value on a tax-deferred basis. In addition, whole life can pay dividends throughout the life of the policy.
Term life insurance, on the other hand, is purchased for a certain term, or period. As long as you die within that period, term life insurance will pay an agreed upon amount to your beneficiaries. It will not pay if you cease to make payments or if you die after the term has expired. In addition, term life insurance has no cash value.
Two other aspects of whole versus term life insurance should be pointed out. The first aspect is that premiums for whole life insurance are higher to begin with, but remain steady over time. On the other hand, premiums for term life insurance are lower near the beginning of the policy, but increase over time. Another aspect is that you can borrow against the cash value of a whole life insurance policy. This is not possible with term life insurance, since it does not have a cash value. There are two variations of whole life insurance that need to be mentioned. The first is a more flexible form of whole life called universal life insurance. With universal life insurance, you can adjust (within certain limits) the premiums as well as the benefit amount over time to suit your financial situation. This is made possible by placing the premiums in a fund that accumulates based on the interest rate. As with normal whole life insurance, this type of policy has a cash value that can be borrowed against.
The second variation on whole life insurance is called variable life insurance. This type is similar to universal life insurance, except that the premiums in the fund are tied to the financial markets rather than to interest rates. While the potential for growth is greater with this type of insurance, the potential for loss is greater as well.
As you can see, there are some choices to be made when considering the purchase of a life insurance policy. Now would be a good time to use some of the other resources at this site to help you decide on the life insurance policy that is right for you and your family.
Mike Bell is the webmaster of http://www.InsuranceOptionsGuide.com, a resource for life and health insurance answers.

Universal life insurance policies provide a flexible insurance solution for those seeking the protection of death benefits. The insured can flex the policy’s premiums and benefits during the life of the policy while the policy creates a residual cash value. This allows one to adjust the nature of their life insurance so that it remains consistent with their actual needs.
Whole life insurance policies offer insured parties a guaranteed interest rate on the cash value of the policy. Universal life policies do this as well. For instance, a universal life policy may guarantee a minimum interest rate on the account of X percent. That percentage will be paid regardless of what happens to the insurance companies actual earnings. However, if the insurance company is able to invest premiums in a way that allows them to exceed the X percent rate of growth, they credit the policy of the insured at the higher rate.
This seems like an absolutely winning situation for holders of universal life policies. After all, they are guaranteed a minimum rate of return on the policy’s cash value and may actually earn in excess of that rate, allowing them to pay less in premiums for the same level of life insurance coverage.
This feature of universal life insurance policies has contributed significantly to their popularity. However, despite the minimum guaranteed rate of return, interest rate levels can still impact universal life insurance policies detrimentally, making it necessary for consumers to consider all possibilities when evaluating universal products.
Although the insured is guaranteed a minimum rate of increase to the policy’s cash value, this perk is somewhat meaningless if an insurance company’s assumptions regarding interest rate behavior are proven to be wrong. All universal life policies are written with assumptions regarding the nature of interest rates in mind. If the company is unable to invest at a level producing the anticipated return, premium costs are forced upward to compensate for the shortfall.
This can result in policyholders being forced into premiums they may not be able to afford. This phenomenon is occurring today for those who bought universal life insurance when interest rates were in double digits. Insurance companies based their universal life insurance policies on the assumption that higher interest rates would continue for some time. This has not been the case, and many insured parties have found themselves paying higher and higher premiums in order to maintain their life insurance. For some, these premium increases are unmanageable, forcing them to cancel their policies completely.
Obviously, the risk of interest rate fluctuations makes universal life insurance less predictable than whole life insurance coverage. However, this unpredictability is not necessarily a reason to avoid universal life. If one is cognizant of the risk of premium price upswing if earnings fail to meet predictions and is prepared to pay the increased premiums in such situations, universal life remains very effective.
This is especially true in light of the fact that the alternative would be to simply buy a whole life insurance policy, which would likely require higher premiums payments right away and with no opportunity for relief at any point during the life of the policy.
Universal life advocates argue that the possibility for cheaper premiums when investment out performs or meets projections makes it a more sensible alternative than agreeing to higher premium payments through the entirety of a policy (whole life).
Whole life advocates maintain that the unpredictability of the markets and of interest rates makes universal life insurance products too unpredictable.
In the final analysis, universal life insurance products seem like a winning solution for those who understand and are able to handle fluctuations in the required premium. If one necessitates complete predictability and is able to overlook the possibility of a cheaper premium over the course of the policy, they may decide that a whole life package makes more sense for them than universal life insurance.
Evan C. Davis works in Medicare customer service and is the webmaster and owner of Easy Insurance Finder. Find out about universal life insurance and online universal life quotes at http://www.easy-insurance-finder.com.