Life Insurance Policies – Making the Best Choice

How to Choose Between Term, Variable, Whole and Universal Life

The choice between whole of life insurance policies, term life insurance or any of the other options available is not about which one is better or worse than the other. Each has its place.

By doing a proper financial needs analysis, life insurance applicants will have a far more accurate idea of exactly how much life insurance to purchase, in what areas and how much they can afford to spend. Another option is to mix and match the various options to better fit in with one's needs.

What is a Universal Life Insurance Policy?

A universal life insurance policy builds on a term life policy with a cash component. Instead of just selecting a specific term and putting 100% of the premium towards the policy, part of the insurance premium payable will go into a cash account. This cash account earns interest as an investment.

As the policy holder gets older, a smaller proportion of the premium goes towards the investment element and a higher proportion towards the risk element. Because it has a cash component, an individual can temporarily stop making payments when cash strapped. Also, one can borrow against the policy in the form of a loan. The disadvantage is that it is more expensive than a term life policy.

It is very important to check whether there are guarantees on the premiums on a universal life policy, otherwise one may be disappointed by the investment returns received when the policy matures.

Ref:http://life-insurance.suite101.com