Universal life may succeed where whole and term fail

Aug 03, 2011

Those who feel bound by the terms of other policies may find the answer in universal life insurance.

Some people feel term life policies provide too little bang for the buck, and whole life is often unnecessary, folks say. So why not meet in the middle? Experts suggest universal life insurance has the affordability of term and the coverage of whole.

Universal life insurance is a form of permanent life insurance developed in the 1970s. It includes a starting premium higher than its term equivalent, according to The Cincinnati Enquirer, but shrinks to save customers more over a period of time that they can set themselves.

Term life policies may be easy to manage, but the bottom line is no one likes seeing rates grow when the policy expires, especially as recent life expectancy heights have policyholders expecting the need for coverage well into their sixties and seventies.

Whole life plans may restrict buyers even more since they will never know for sure they'll need more than term, and can't escape from if rates become unaffordable.

"What happens if they cannot pay the insurance premium, or want to decrease the death benefit because they don’t need that level of coverage any longer?" asked Evan Tunis, president of Next Exit Retirement in Florida. "With universal life, you have flexibility."

Universal accounts are designed to let users fund a custom duration that they're free to adjust along the way. The Enquirer estimates that universal life creates a lower policy turnover, which yields corresponding profit for insurers.

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