Whole Life Insurance and Universal Life Insurance – What Is The Difference?

Applying for life insurance is a major step in your life. But you must choose carefully the policy. If you select a plan that does not fit your financial possibilities or other requirements, you may end up with a disadvantageous policy that can either drain your money or offer little in return.

images3When it comes to permanent policies we always encounter 2 major policies: whole life insurance and universal life insurance. In this article we will explain the difference between them. If you are interested in one particular policy, we recommend you to search for quotes, even life insurance quotes no exam required.

Whole life insurance is probably the most known permanent policy. It is suitable for long term goals and it is a stable policy with premiums locked at the same value.  Cash value accumulation and death benefit are guaranteed.  A savings feature is added to life coverage, resulting higher premiums, in comparison to other policies (for example, term life).  With every payment you make, the cash value increases.

The company will also place a part of your insurance money in an interest bank account. Everything you save and the cash value are tax-free. You can use the cash value to borrow money or to surrender the policy. You can choose to participate in the surplus of the insurer and get dividends annually.  Dividends can be cashed in or let them accumulate interest. In addition, you can use them to pay the premiums or buy additional coverage.

Universal life insurance is also known as “adjustable life insurance”.  Death benefit can be increased or reduced by the policy owner.  Premiums can be paid at any time and any amount, within certain limits.  Coverage can be also increased or decreased. You can select from a fixed death benefit or an increasing death benefit that is equal to the face value of the policy plus the cash value amount. It is a more flexible policy than whole life.

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