What are the advantages of this type of insurance?
Term life insurance policies tend to be a lot less expensive in comparison to other types of insurances, including whole life insurance, universal life insurance and variable life insurance for example. Term life insurance also typically has a very, very specific period of coverage, which is typically expressed in terms of 10 years, 15 years, 20 years, 25 years or 30 years. What this does is that it allows you to only buy the amount of coverage that you are actually going to need. For example, if you are only concerned about having life insurance coverage while you have children living in your home or while you still have a mortgage or a car loan that needs to be paid, then you can figure out exactly how much coverage that you need and do not pay any more than that.
What are the disadvantages of this type of insurance?
There isn't any cash value component associated with this type of insurance policy. Your premiums are strictly going to go toward paying the policy, and they are not going to earn any interest for you, or otherwise accumulate in any way, shape or form. Having a specific term, while it can be advantageous, is also capable of being a drawback for you. Should you happen to purchase a term policy of 20 years and then decide after these 20 years that you would like to extend that coverage, then you may end up needing to undergo a process to prove your insurability, and you may actually end up being denied a level of additional coverage, or you may end up needing to pay a significantly higher premium in order to renew your insurance.
Universal Life Insurance
Universal Life insurance is a type of insurance that builds upon the concept of term life insurance, adding in the missing cash component. Here, rather than simply selecting a pre specified term and putting all of your premium toward keeping the policy alive, part of the amount that you are paying in your premium is going to go into the policy's cash account. This cash account is then going to earn interest and it will accumulate on a tax deferred basis.
What are the advantages of this type of insurance?
This type of insurance is going to provide you with an extra level of flexibility. Because there is a cash component attached, you could stop making your premium payments on a temporary basis as long as the policy's cash value is capable of covering the insurance costs. You may also be able to decrease or increase your selected death benefit over a period of time. You can typically borrow against this type of policy as well in the form of a loan.
Photo Credits: swanksalot
Related Posts -
Start Saving Money Today Here are five ways that you can begin to save money, beginning today. Americans are not saving enough money in this day and age to help ensure their stability financially. If you have enough money in your savings account, then it is going to be able to protect you from...... -
Different Types of Short Term Investments Short term investments are the most ideal form of investing if you want to invest over a period that is relatively short. Cash manager accounts make it possible to access your money whenever you need to. Fixed term deposit investments secure your money for the entire length of the term....... -
Comparing Life Insurance Policies pt 3 Speaking of Universal Life Insurance… What are the disadvantages of this type of insurance? Universal life insurance is generally much more expensive in comparison to term life insurance options. While some of these added costs are going to be going into your account in the form of a cash value...... -
Getting Motivated to Organize Your Finances For many people, the first steps towards getting your finances under control are the hardest. Whether you didn’t spend enough time learning about basic personal finance principles when you were younger, or life happened and you’re now at the bottom of a very large problem, it can be difficult to...... -
Does Insurance Really Matter When it Comes to Personal Finance? Most of us look at insurance premiums as a big drain on our finances. Insurance policies do not come cheap, but they may be essential. In many ways, you can look at insurance as a way of avoiding financial failure in the years to come. While you can’t buy a......
Related Websites -
...struggle in a search for the holy Norris Burkes again. You can find a link to his complete columns on my front page link section. Karin Our quest for life's answers never ends March 17, 2007 BY NORRIS BURKES Truthfully, I think atheists have a thing or two to teach people of faith. I think they teach...... - 4 Types Of Life Insurance Compared: Term Life, Whole Life, Variable Life, And Universal Life Life insurance is a confusing topic. You've got death benefits, life expectancy, surrender penalties, term risk, and any number of contract riders to obsess over and worry about. That said, there are four major types of life insurance. While each type can have a lot of internal variation regarding the......
-
Why the Type of Life Insurance you Buy Doesn't Matter This is a guest post by Aaron, the president of Clarifinancial â the only way to get custom life insurance quotes from multiple agents anonymously. Because they let real life insurance agents compete for you without any unwanted phone calls or emails from agents, choosing from the competition is a...... -
Should You Have a Mortgage in Retirement? It used to be uncommon to retire with debt. Even less common was retiring with a mortgage. Not any more. According a new report from the Center for Retirement Research, in 2007 41% of households aged 60-69 had a mortgage. Remarkably, half of those mortgage debtors had sufficient assets to...... -
Do You Or Your Loved Ones Need Insurance For Long-Term Care? I wrote a while back about long-term care insurance for our parents, but I just came across an article in Parade Magazine asking the same question I did back then, with some helpful information for those of us starting to look into long-term insurance for our loved ones. If you......
Categories:
insurance
Tags:
1 comment so far ↓
You missed which could arguably be the biggest disadvantage of term insurance, opportunity cost. Since somewhere around 2% of all term policies ever pay a death benefit, there is a lot of money going to, essentially, nothing. The creates even more lost opportunity cost.
Leave a Comment