subject: Term Life Or Universal Life? Finally An Option That Allows Flexibility And Choice! [print this page] Traditionally, people wanting the benefits of both temporary and permanent life insurance have been relegated with purchasing two different types of policies. They rely on temporary term life insurance to provide for them when they are young and permanent whole, UL or VUL insurance to provide for them when they are older. If you dislike permanent life's expensive premiums, slow rate of return and costly commissions, and surrender charges, you would probably end up buying term and sticking with it. When it comes time to extend coverage or buy additional coverage, you're usually left with no options but to re-qualify for a new policy and pay a LOT more for it.
In the last couple decades, a new hybrid type of life insurance product has been increasing in popularity in the insurance market called "term life on a UL chassis". Term-on-UL was actually an industry innovation created in response to stringent regulations that required insurance carriers to maintain a certain amount of reserve requirements in order to sell large term life policies. With a term-on-UL policy, people seeking life insurance protection were now allowed to have basic (and affordable) term life insurance in its default setting. Term-on-UL allows amped up coverage, as well as protection and cash value accumulation later within the same policy; if they decided that they needed permanent insurance instead.
Built on the foundation of a complex permanent Universal Life (UL) policy with many features, term-on-UL lets you have term life insurance coverage as long as you pay the minimum premium. Coverage can also be extended through the insured's lifetime even after buying the policy, though the rates would reflect your state of health at the time of extension. It also allows you to switch from temporary life insurance to permanent life insurance without the hassle of applying for a new one. With its Universal Life chassis, this new hybrid is becoming increasingly popular because of its flexibility, choice and versatility among buyers of all ages.
Advantages
If you used it as term insurance, you have the option of retaining insurance coverage at the end of the term as a UL policy without a medical examination. If your health has deteriorated over the years at the time of renewal, you may find it difficult to find an affordable life insurance policy. Even though UL premiums are many times more expensive than term's, something is better than nothing.
UL policies allow premiums to be paid at any time, in any way and in whatever amounts the insured chooses, as long as enough is paid into it to keep the policy in force. Term UL offers the very same flexibility, even if the insured is using the policy only for its term insurance benefits.
You can change the face value of the policy and adjust the premium payment even after the policy is active. As long as payments are made and made on time, you can extend coverage even up to the age of 120! The number of years covered can also be a number not typically offered, like say 26 years, and the premiums will be altered so you only pay for what you wanted, and not a dollar more. Coverage periods can also be shortened if necessary.
Rates you'll pay on the policy are guaranteed to remain level, and when you apply for an extension, the new rates will remain level for the new coverage extension period.
The policy can be paid up with a single premium, and paid-up additions allow flexibility in terms of how you want your money to be used and grown.
1035 exchanges are also allowed into and out of the policy. This will allow you to incorporate an old, under-performing whole life policy into your new Term UL, or accumulated cash value into an annuity once you near retirement.
You don't pay extra for all these features that piggyback onto your policy. Because insurance companies are actually saving money by not having to comply with large reserve requirements in order to sell typical term life insurance, these savings are passed on to you, allowing this product to be competitively priced as compared to other feature-laden term policies out there. So you pay low cost term life insurance ratesfor a whole lot more coverage!
Warnings:
Don't buy this product if you don't understand the fundamental idea of the policy and how it works. If you don't understand what it is, you won't know how to maximize its use and profitability to you.
With flexibility comes complexity. Don't tell yourself it's just a term life product because it really is not. If you would like simpler life insurance without the bells and whistles and streamers, stick with term life insurance with the term conversion (to whole life) rider that can be activated later on.
In traditional term policies, if the face value of the policy was too large and you couldn't afford making payments, your only choice would have been to drop the policy altogether and get a new one. You can lower face value in this policy, but it is often expensive to do so. Start with the minimum amount of coverage you'll need and increase as you find the need to.
When doing a 1035 exchange to an annuity, as with any other form of permanent insurance, beware of huge surrender costs.
Ask your agent to sit down and take the time to explain its features to you. The beauty of term on UL extends far beyond a literal understanding of the policy, and you could make it a shrewd investment option if you are taught how to use it well.
Use an online insurance aggregator to find the best deals even when it comes to a great product like term-on-UL. At AccuQuote.com, one of the nation's largest life insurance aggregators, you'll find term-on-UL life insurance quotes online. Use the needs analysis calculators, free quote engine and advanced expertise to arrive at the best life insurance decision for you and your family. With an accurate quote and term-on-UL, you could end up saving hundreds of dollars in life insurance premiums.
by: Pat Cassidy
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