Buying a life insurance plan has gotten a lot simpler than it was before. But at the same time, the life insurance industry has gotten a lot more confusing for someone who simply wants to buy the right kind of protection for their family. Apart from deciding what to buy, it has become increasingly difficult to understand the lingo around life insurance. As someone who is possibly looking to buy a new policy, all of this information can overwhelm and confuse you.
Due to this confusion, many people simply buy the first policy they find. While any kind of life coverage is a good thing to have, one should always aim to have the type of life insurance that is better suited to their needs. Two such types of insurance are whole life insurance and universal life insurance.
What is whole life insurance?
If you are looking for the simplest description of whole life insurance, you don’t need to look any further than the name of the policy. Whole life insurance offers coverage for as long as you live. This means that no matter when you die, your family will still get the death benefit.
This type of life insurance plan is recommended for individuals who are sole breadwinners, having multiple dependents. A whole life insurance policy offers you the assurance that if you die at any point in time, your dependents will be financially secure.
The payout for such policies happens in two ways. The first is policy maturity and the second is the policyholder’s death. What is unique about whole life insurance is that these two scenarios are the same. The plan is designed to last as long as you live and offers death benefit when you die.
What is universal life insurance?
While it still offers life coverage, universal life insurance is quite different from regular life insurance options. The reason being that it offers higher flexibility to the policyholder. The flexibility it offers is in the death benefit amount. You can increase or decrease the amount depending on your unique situation. However, doing so is subject to each policy provider’s terms and conditions.
If you want to increase the sum assured in your policy, you have to undergo a medical examination. The results of this medical examination are more of an assurance to the policy provider that you are in good health. Decreasing the coverage means you would have to pay lesser premiums. You can easily do so by bearing a small amount of money known as surrender charges.
A universal life insurance policy also offers flexibility in terms of premium payments. As a universal life insurance policyholder, you can pay premiums at different times and in different ways. You can either make a lump-sum premium payment or you can come up with a periodic payment structure.
Which life insurance policy is better for you?
These permanent life insurance policies combine different elements of insurance and investment in varying proportions, one of which is flexibility. The question of which policy to opt for depends on what exactly you are looking for in a policy, along with your financial situation.