The expression life assurance may seem a little unfamiliar to you. But you definitely know it by its more familiar name. Life assurance and insurance are more or less the same; they both assure that life does not stop for the survivors even if the main breadwinner dies before he has been able to make other arrangements for them. In both cases, the policyholder has to qualify for the policy and pay premiums at a stipulated rate at stipulated interval to keep the policy running. If the insured dies while the policy is still running, the designated beneficiary gets a stipulated amount as death benefit. As simple as that.
However, if we go into the technicalities, we will find that there is a major difference between the two concepts. Technically, only those policies that promise assured return can be called life assurance policy. A term life for example does not make any such assurance and so it cannot be called assurance policy; it is a pure life insurance policy. On the other hand, a whole or universal life always provides some assured return and so we can categorize them as that.
Indeed, there are different types of life insurance policies. Although many experts today recommend only the term life for the insurance purpose, those who can afford it prefer the universal life insurance policies more. The main differences between the two are as follows:
While term life is sold for 1/5/10/15/20/25/30 years only, universal life like all permanent policies are sold for the life of the insured.
In term life, the premium you pay does not fetch you anything more than death benefit. In the case of universal life policies, the premium payments above the cost of insurance are credited to the cash value of the policy and so these policies provide investment opportunity as well.
If you do not require the coverage, a universal life can be cashed out and the proceeds can be utilized for self-insurance or any other purpose. There is no such facility available with term life.
The price of a term life is very reasonable because the entire premium amount you pay can be utilized to meet the cost of insurance. In constrast, the universal life is always overpriced to allow cash value accretion and compulsory return.
A universal life insurance can be utilized in so many ways. The estate liquidity expense and your final expense such as your burial expenses and unpaid medical bills can be covered with such a policy. Income replacements and debt coverage are two other important usages of a universal life policy. But if you can calculate the term carefully, you can cover them with term life also.
I must add that, if you go into the basics, you will find that each policy has its own set of pros and cons. You just need to see which one will suit you most. In case of term life, you need to calculate the term carefully; buying fresh coverage later in life may turn out to be financially unviable. Life insurance quote can be received online; try putting different inputs and you will understand how the policy prices increases with age or health condition.
If you opt for term life, you must also cultivate the habit of putting aside substantial amount every month for investment purpose. Since term life insurance rates are low, the difference of amount you invest should create big enough assets for you provided you do that regularly. Therefore, buying a term life requires you to have some financial discipline.
If you opt for no medical exam life insurance policies instead of fully underwritten term life policies, you may not have any difference to invest. Most of these no medical policies are term life and hence they should have been cheaper. However, since they provide the coverage without fully determining your insurability, they remain rather risky for the carriers and so to compensate such risk, they naturally price them higher.
However, not every no medical policy guarantees coverage. The simplified no medical policies for example require you to answer some health questions and the coverage is based on that. However, there are guaranteed issue no medical policies too; these policies exempts you from answering those health questions as well. Then again, if you opt for graded life insurance, you can avail whole life coverage without having to appear for any medical examination or answer any health questions. Indeed, options are available in plenty; you just need to be aware of them and then choose the one that will suit you most.
However, if we go into the technicalities, we will find that there is a major difference between the two concepts. Technically, only those policies that promise assured return can be called life assurance policy. A term life for example does not make any such assurance and so it cannot be called assurance policy; it is a pure life insurance policy. On the other hand, a whole or universal life always provides some assured return and so we can categorize them as that.
Indeed, there are different types of life insurance policies. Although many experts today recommend only the term life for the insurance purpose, those who can afford it prefer the universal life insurance policies more. The main differences between the two are as follows:
While term life is sold for 1/5/10/15/20/25/30 years only, universal life like all permanent policies are sold for the life of the insured.
In term life, the premium you pay does not fetch you anything more than death benefit. In the case of universal life policies, the premium payments above the cost of insurance are credited to the cash value of the policy and so these policies provide investment opportunity as well.
If you do not require the coverage, a universal life can be cashed out and the proceeds can be utilized for self-insurance or any other purpose. There is no such facility available with term life.
The price of a term life is very reasonable because the entire premium amount you pay can be utilized to meet the cost of insurance. In constrast, the universal life is always overpriced to allow cash value accretion and compulsory return.
A universal life insurance can be utilized in so many ways. The estate liquidity expense and your final expense such as your burial expenses and unpaid medical bills can be covered with such a policy. Income replacements and debt coverage are two other important usages of a universal life policy. But if you can calculate the term carefully, you can cover them with term life also.
I must add that, if you go into the basics, you will find that each policy has its own set of pros and cons. You just need to see which one will suit you most. In case of term life, you need to calculate the term carefully; buying fresh coverage later in life may turn out to be financially unviable. Life insurance quote can be received online; try putting different inputs and you will understand how the policy prices increases with age or health condition.
If you opt for term life, you must also cultivate the habit of putting aside substantial amount every month for investment purpose. Since term life insurance rates are low, the difference of amount you invest should create big enough assets for you provided you do that regularly. Therefore, buying a term life requires you to have some financial discipline.
If you opt for no medical exam life insurance policies instead of fully underwritten term life policies, you may not have any difference to invest. Most of these no medical policies are term life and hence they should have been cheaper. However, since they provide the coverage without fully determining your insurability, they remain rather risky for the carriers and so to compensate such risk, they naturally price them higher.
However, not every no medical policy guarantees coverage. The simplified no medical policies for example require you to answer some health questions and the coverage is based on that. However, there are guaranteed issue no medical policies too; these policies exempts you from answering those health questions as well. Then again, if you opt for graded life insurance, you can avail whole life coverage without having to appear for any medical examination or answer any health questions. Indeed, options are available in plenty; you just need to be aware of them and then choose the one that will suit you most.
About the Author:
Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on term life insurance cost and instant life insurance, visit his site today.
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