How To Weigh the Benefits of a Universal Term Life Policy

More people are realizing the importance of having a life insurance policy. In these uncertain times, life insurance is not just considered as a contingency but rather an asset. Indeed, life insurance provides security and protection as well as accumulated value for your money over the course of time.

Today, one of the most popular types of life insurance policies is the universal term life policy. It is actually a combination of term insurance and whole life.

Term life insurance is a plan that covers a limited period of from 1, 5, 10, 15 or 20 years. Some insurance companies also offer term plans for 30 years for younger individuals - such as infants. This type of insurance plan is usually inexpensive compared to other life insurance plans, and the premiums stay constant throughout the coverage period. At the time of its expiration, you may opt to renew (at a higher rate) or convert it to another form of policy.

In comparison to a term plan, a whole life insurance policy is more expensive and the premium is usually paid during your entire lifetime. Under this plan, your beneficiary receives a benefit payment upon your death. However, if it expires while you are still living, you will receive a payment for the entire face value of the plan.

A universal term life policy, on the other hand, is a combination of term life and universal life insurance policies. Classified as term life insurance, a universal term life policy has less expensive premiums than a whole life policy.

Because of its enticing features, the universal term life policy is preferred by policyholders. Here are the reasons why a universal term life policy offers more benefits than any other kind of life insurance plans:

• The universal term life policy accumulates cash value.
• Cash value is flexible, which means the premium can be adjusted according to your present needs.
• It offers lifetime coverage but premiums are lower than whole life policy.
• It is an excellent way of keeping your savings intact while at the same time benefiting from its lifetime protection.
• It is more transparent and flexible.
• There is a possibility of a higher internal rate of return. The policy owner has two choices for death benefits. One, the face amount at death is paid at maturity. Here, the cost of the insurance decreases as premium payments accumulate each year so that as the policyholder gets older, the premium rates he will pay get smaller too. Two, death benefit increases each year. Death benefit plus cash value are paid upon maturity; however premium payments are never reduced because of the cash value added over the death benefit.
• A cash account is made part of the policy. This cash account increases while the policy owner continues to pay his premiums. The policy earns interest too, based on rates prescribed by the insurance company.

The Universal Term Policy is one of the latest insurance plans offered in the insurance business, but because of its impressive features, it has steadily gained approval from insurance stakeholders.