Let’s face it choosing the right life insurance policy can be extremely complicated and not much fun. But in spite of all that most of us know how important it is to have life insurance, to make sure our love ones are covered when we die and aren’t left with a financial burden.
What is the difference between whole life and universal life insurance, you ask? Since both provide a financial benefit to your beneficiaries when you die, how do you decide which policy is the best choice for you? For example, do they both offer cash value that may increase over time? Is one typically more expensive than the other? Here are some basic answers so you better understand the difference between whole life and universal life insurance.
Whole life and universal life insurance are both permanent policies. Permanent life insurance policies are designed to last your entire life and won’t expire after a certain period of time, as long as your required premiums are being paid. Both whole and universal can accumulate cash value over time that you will be able to borrow against tax-free, for any reason.
Whole life insurance has a fixed premium, meaning you pay the same amount each year for your entire life. The cash value that accumulates can be use while you’re still alive for absolutely any reason and is tax-deferred. You will not outlive your protection as long as your premium payments are made in a timely manner. Whole life allows you to take loans against your policy.
Universal life insurance has flexible premiums, meaning that you are allowed to adjust how much you pay each year by accessing some of the policy’s cash value. Depending on your policy's potential cash value, it may be used to skip a premium payment, or be left alone with the potential to accumulate value over time and the interest that’s earned is tax-deferred. Some policies may allow you to increase or decrease the death benefit to match your particular circumstances. Also, in many cases you may borrow against the cash value that may have accumulated in the policy.
The flexibility that a universal life policy provides is a key differentiator over whole life. As a result, universal life insurance premiums are typically lower during periods of high interest rates than whole life insurance premiums, often for the same amount of coverage.
Both whole and universal life policies have their own unique features and benefits, they both focus on providing your loved ones with the money they will need when you die. Cosmo Insurance Agency will be able to help you select the policy that best meets your individual needs, budget, and financial goals.
Call Cosmo today, to speak with a life insurance representative!
Cosmo Insurance Agency is an independent insurance agency serving surrounding communities in New Jersey. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating the latest in technology-based tools and laws on healthcare, employee benefits, life insurance and finance, we keep our clients up-to-date with the plans that encompass all of their needs, whether it is individual or group insurance.
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