| Should
I purchase Term or Universal Life Insurance?
Term or Universal Life?
The
value of Universal Life vs. Term Insurance is similar to the
value of owning a house or renting.
Both
owning and renting a house have a cost, even if it is the
same house. Usually it will cost less to rent a house but
the cost will increase every year. Generally, owning a home
requires a higher payment that is level over the life of the
mortgage.
After
a period of time, if you are renting a house, you will have
only rental reciepts. If you are paying for a mortgage you
will have equity (or cash value.) In addition, rent will be
continuous while a mortgage has an end (ie: 30 year mortgage)
where you eventually own the house and have no more payments.
Renting
vs. Owning, which would you rather do? With your life insurance
program…wouldn’t you rather own than rent ? Let
take a look…..
Example
The idea to understand is that a universal life plan is similar
to owning a policy. A term insurance plan is similar to renting
a policy. Let's take an example of a male, age 35 (with life
expectancy to age 75) who purchases $100,000 of life insurance:
| |
Universal* |
Term** |
| Year |
Cost |
Cash
Value |
Cost |
Cash
Value |
| 1 |
$400 |
$0 |
$124 |
$0 |
| 5 |
$400 |
$1,003 |
$141 |
$0 |
| 10 |
$400 |
$2,452 |
$166 |
$0 |
| 15 |
$400 |
$4,979 |
$206 |
$0 |
| 20 |
$400 |
$8,055 |
$284 |
$0 |
| 25 |
$400 |
$11,742 |
$467 |
$0 |
| 30 |
$400 |
$16,025 |
$710 |
$0 |
| 40 |
$400 |
$25,942 |
$1,381 |
$0 |
| |
$16,000
Total Cost |
|
$17,399
Total Cost |
|
In this example
you can clearly see how the universal life proposal, in the
long term, is a much better idea for life insurance.
* The universal life numbers used for this quotation were
based on a male age 35 preferred non-smoker. The policy is
issued by Protective Life. The policy name is Protective Classic
UL. The cash values are based on the current crediting rate
of 5.65%. Other ages and risk classifications will differ.
Be sure to see a full company illustration befiore making
a decision.
** The term policy used for this comparison
is a 5 year renewable term policy issued by ING. The numbers
assume that every five years the insured will re-qualify through
the medical process. If the medical is not done the cost would
be much greater.
|
