Term vs. Universal life assurance: Which is better?

Term life and universal life are two of the most frequent types of life insurance. The length of the policy, whether or not it accrues a money value, and the apparent abundance of its price are the most significant differences among them.


Term life insurance covers a specific period of time, such as ten or twenty years, for the client.
It’s possible that universal life insurance might be a long-term policy that covers the policyholder for the rest of their lives.
Additionally, universal life insurance includes a savings component that is expected to increase in value over time.

Term life assurance

Term life insurance is the most basic type of policy. For the duration of that period, you are covered. Some policies also include coverage for torture and accidental death in addition to the standard coverage.

Term insurance ends after a predetermined number of years, such as 10, twenty, or thirty. But some insurers allow the policy to continue at a lower rate or to be converted into long-term insurance without a set end date. Term life insurance is typically less expensive when the policyholder is younger and has a lower risk of mortality. Costs will rise as people live longer and take on more risk due to these factors.

Term life insurance is frequently offered to employees as a benefit to their employment. It’s a good idea to check with A.M. Best, Fitch, Moody’s, and Standard & Poors before purchasing an insurance policy to ensure that the firm you are dealing with is financially stable and will be there if you need it in the future. The easiest term life insurance companies are also listed annually on the Investopedia website.

Universal Life Insurance

The broader category of plans referred to as “permanent” or “money price insurance” includes universal life insurance. A tax-deferred savings component or money price is included in certain types of insurance plans, which combine a benefit (such as a term policy) with an insurance benefit. If you have any money saved up, you can use it now or in the future for whatever you like.

If a policyholder is unable to end the contract on time, he or she is likely to face fines. During the first few years of the policy, a significant portion of the premiums paid by the customer can be allocated to the savings component. It is possible to put a larger portion of each premium toward the purchase of insurance as the customer becomes older and the cost of insuring them rises.

For example, if a 21-year-old gets insurance, their monthly cost maybe $20 for a specific amount of coverage. With universal insurance, the 21-year-old would pay $100 a month for the same amount of coverage, with the death benefit portion of $20 and the savings portion of $80. Even if universal life costs $100 per month but goes toward savings less, when someone reaches the age of forty-five, insurance costs may drop to $50 per month.

With term life insurance, policyholders often receive a significantly greater value for their money than they would with a traditional policy.

Special concerns

In the opinion of most independent experts, term life insurance is a good option for the average individual who wants to protect themselves and their loved ones from the unexpected. For young families on a budget, this is especially true, in part because they may acquire a much longer-term policy for the same amount of money.

That insurance requires a degree completion may not be a deal breaker either. Life insurance may no longer be a necessity for the elderly after their children have reached adulthood and become financially independent.

However, this does not imply that longer life is better for all people. For example, persons who would benefit from the tax advantages of permanent insurance may be less concerned about the higher premiums.

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Policy featureTerm life insuranceWhole life insurance
Initial premiumLowTypically, higher-than-term insurance
Premium over timeMay remain the same or increase over timeGuaranteed to remain the same
Permanent coverageNoYes
Length of coverageTypically, 10-30 yearsLifetime coverage
Health exam requiredIn most cases, but depends on the amount taken outYes
Cash valueNoYes – accumulates over time
Eligible for company dividendsNoYes – depending on the company
Guaranteed death benefitYesYes
Accelerated death benefitYesYes

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