Whole Life Insurance Quotes Texas – Although similar in some respects, universal and whole life insurance policies have some key differences. Universal life insurance (UL) gives policyholders flexibility in premiums, death benefits and the savings element of their policies. Whole life insurance, by contrast, offers consistency, with fixed premiums and a guaranteed accumulation of cash value and death benefit.
These two types of life insurance fall under the category of permanent insurance. Unlike term life insurance, which guarantees payment of a death benefit over a specified period, permanent policies provide lifetime coverage. If you cancel a permanent life policy, you will receive the cash value of the policy (minus any fees).
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Both of these versions of life insurance usually consist of two parts: a savings part or an investment part and an insurance part. This makes the premiums higher than those for term policies. Insurers can also borrow against the cash value of the policy. Hence, permanent life insurance is also known as cash life insurance.
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Whole life insurance covers you for the rest of your life, no matter how long you live. As long as you continue to pay the premiums, your beneficiaries will receive the death benefit when you die. This policy is suitable for long-term liabilities such as caring for an adult dependent child or expenses after death such as estate taxes.
One of the features of whole life insurance is that it combines coverage with savings. Your insurance company puts a portion of your premiums into a high-interest bank account or investment account. With each premium payment, your cash value increases. This savings element of your policy increases your cash value tax-deferred.
Whole life insurance is designed to meet an individual’s long-term goals and is important to maintain while you are alive.
To borrow against a whole life policy, you must meet a minimum cash value requirement, as you cannot borrow against the face value of the policy.
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One attractive feature of whole life policies is the guaranteed cash value. Because you can borrow against it — or surrender your policy to get the cash value — it offers some financial flexibility in the event of an emergency.
Some whole life policies pay dividends as well, although they are not guaranteed. If you do get them, you can choose to take them out each year in cash, let them accumulate interest, or use them to lower your policy premiums or buy additional coverage.
However, the level of premiums, fixed death benefits and attractive life benefits (eg loans and dividends) make this type of policy quite expensive, especially compared to the term of the policy. It is advisable to buy whole life insurance when you are younger so that you can afford it in the long run.
Universal life insurance is also called adjustable life insurance because of the flexibility it offers. You have the ability to reduce or increase your death benefit and adjust your premiums (under certain limits) once there is money in the account.
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When you pay into your universal life insurance plan, a portion of it goes into an investment account, and any accrued interest is credited to your account. The interest you earn grows tax-deferred, increasing your cash value.
You can adjust the death benefit when necessary, increasing it (often subject to a medical review) if your circumstances change or reducing it to reduce premiums. Alternatively, you can use your cash value to pay premiums as long as there is enough money in that account.
The ability to adjust the face value of your cover without surrendering the policy is an attractive feature of universal life cover. As your financial circumstances or responsibilities change, you can increase, decrease or even stop premium payments.
Another advantage is the ability to partially withdraw or borrow funds from the cash value. However, you should monitor withdrawals as they reduce the amount of cash value – if you withdraw too much, you may be left with little in times of need. If your premiums do not cover the cost of insurance and you have no cash value, then your policy may lapse.
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Another disadvantage of universal life insurance is the interest rate, which often depends on market conditions. If the policy works well, there are possibilities of potential growth in your savings fund. On the other hand, if it performs poorly, then the estimated returns are not earned – and this can increase your premiums.
Another negative feature: the fees. As with all permanent insurance policies, surrender charges may apply at the time of policy termination or withdrawal, especially in the early years.
Make sure you discuss the status of your cash value fund with your adviser or insurance agent before stopping premiums. Your policy can lapse if you stop paying premiums and don’t have enough cash value to cover the cost of insurance.
Throughout life you pay higher premiums for the guarantees you receive. An equivalent universal life policy will cost less, but will also carry a degree of risk for policyholders.
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The right life insurance policy for you will depend on your family structure and financial situation, as well as your appetite for risk and desire for flexibility. In addition to universal life and whole life, you can also explore other forms of life insurance such as term life, group life and more.
Regardless of which type of policy you decide on, be sure to also compare the companies you’re looking at to make sure you’re getting the best whole life insurance or universal insurance policy possible.
Term life insurance is an inexpensive option that provides a death benefit for a set number of years (the term), such as 10 or 20 years. Term policies, unlike whole or universal life, do not accumulate any cash value. Term life is often the cheapest option.
Indexed Universal Life (IUL) is a variation of Universal Life (UL) in which the cash component of the policy is linked to the performance of a stock index such as the S&P 500. The policyholder decides how much cash value to allocate to or to. fixed account or account equity indexed.
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There will be a limit above which the policy will no longer credit the account, such as 12% per annum. So even if the S&P 500 rises 20% in a given year, the policy will only earn 12%. If the index falls, returns may be lower, although there are often floors to prevent extreme losses.
As long as the universal life policy is fully funded and premiums are paid on time, the UL policy will be in effect permanently, until death.
Depending on the insurance company and the terms of the term policy, you may be able to convert it to permanent coverage without needing a new medical exam. The new whole life policy will come with higher premiums, based on how old you are when you convert.
Universal life (UL) and whole life are two types of permanent life insurance. Their differences include the fact that universal life policies provide flexible premiums and death benefits but have fewer guarantees, while whole life policies have predictable premiums and guaranteed cash value accumulation.
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You can borrow or withdraw the cash value with either type of life insurance. However, be aware that a whole life policy usually has higher premiums than an equivalent UL policy.
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