There are various types of insurance schemes for the common man. They each have their advantages and disadvantages. What works for you can be chosen only after a detailed study and thorough understanding of all the finer details of each policy. Let us compare term life insurance and universal life insurance policies.
Term life insurance is a basic insurance that is valid, as the name suggests, only for a specified period. And, if the insured person is alive at the time the policy period ends, then he or the beneficiaries of the insurance coverage are not compensated in any way. The insurance premiums paid thus far are rendered useless. Although the universal life insurance is more expensive than the term life insurance, the security of getting a certain payout at the end of the duration of this policy is satisfying, unlike in a term life insurance.
However, universal life insurance, or permanent insurance as it is otherwise called, combines death benefits with a savings factor that can be reinvested or cashed at any time and, additionally this is also tax-free. But policy holders are penalized for pre-closing the universal life insurance earlier than its fixed term.
Irrelevant for those who want to insure themselves against unforeseen accidents or mishaps, term life insurance is in contradiction, a good alternative for those who know for sure that their life is nearing an end because of a serious illness or health condition. But for those people who want a secure and definite payout after their life ends, universal insurance is the right choice.
The choice of converting a term life insurance policy to a permanent insurance within a limited time frame is helpful for many who decide to do exactly that, considering the changes in their health or living situations. Although it is expensive to do so, term life insurance can also be renewed after its term expires. Despite being more complex than term life insurance, universal life insurance has its advantages. Withdrawals are made possible and loans are allowed against the insurance amount during the term of the policy.