December 26th, 2006 | 
Author: 
bugs asked:
could someone give me the pros & cons on both?
Tiara Reznicek
could someone give me the pros & cons on both?
Tiara Reznicek
Posted in Insurance | 
Tags: Insurance, Pros Cons, Term Insurance, Term Life Insurance, Universal Insurance, Universal Life
In my professional opinion, universal is a waste. You’re better off getting term, then paying what you’re saving on the insurance to an investment firm. The rate of return on a universal policy is generally lower than you would get in most types of mutual funds.
Term insurance> It’s cheaper and it’s just pure insurance. Whole life or universal is a scam.
Universal is flexible premium payment and term life might be cheaper and you have to pay each month. Depends on what you are looking for, go talk to an agent and see what they suggest you.
Term life only last about certain yrs and it doesn’t build any value
“Building Value” is not something you need with life insurance. You can earn much higher rates of return by investing the difference in premium and you don’t get a few years with no growth, like a universal life.
Universal Life is a “Term Policy” with a “savings feature”. It’s a waste of your money. Buy a 20 or 30 year term certain “term life insurance policy”………….. Save the rest and you’ll have much more money when you retire!
Never buy “investment” products from banks or insurance companies, it’s almost always a mistake.
Never buy any other life insurance than term insurance unless you’re mega-wealthy and have enough money to save beyond the limits of IRA’s and 401K’s.
Universal and other forms of permanent insurance are for rich people to establish estates for their heirs. For average Joe, they are a waste of money.
The concept of buying a term policy and investing the difference has been sold to people many times, but it just isn’t true. You don’t want to retire with a million dollars and watch it deplete. You need some type of supplemental income throughout retirement.
Universal Life is better because of its flexibility, lower cost in comparison to Whole Life, and the fact that it accumulates value and allows you to withdraw money in the future.
Term is better overall. Universal, Variable, and Variable Universal are mostly sold as “retirement vehicles,” which is complete bullshit. Never use an insurance policy as an investment vehicle.
Cash value policies are usually sold to the wealthy (Over $2 million in assets) to cover the estate taxes (Caps at 40 percent I believe). I have a VA that does the same thing, builds at a higher rate of return, and has a rider to cover that 40. Cash value policies of ANY kind are pointless these days, except to be replaced by better quality term products.
The ONLY time one would need one is if they could not get coverage else where and needed a small paid up policy to bury them with.
Universal life insurance is better suited towards estate planning and income tax planning. It is also used as a tax deferred investment vehicle for wealthier individuals that have maxed out or aren’t eligible for other tax deferred investment vehicles like IRAs and 401Ks.
Term life insurance is better suited for more pure death benefit needs like income replacement, paying off debts, and general financial needs that occur when someone dies. It is financial protection from death in its purest form.
It completely depends on why you are buying the insurance in the first place.
Quick suggestions:
1) If you are buying the insurance to cover a temporary need (IE: paying out debts, making sure the kids are taken care of until they can fend for themselves, etc) of less than 20 years, go with term.’
2) If you are buying insurance to cover a perminent need that may/will never go away whether you die tomorrow or 50 years from now (IE: Funeral costs, probate fees, final taxes, charitable donation, etc), go with whole life or universal. Over the long term, the cost of a U/L or Whole Life policy will be FAR cheaper in total amount paid in premiums.
3) If you are buying insurance as a tax shelter (depending on what country you live in) go with U/L.
4) If you are very young, like less than 30, consider U/L over term: #1 The additional cost of U/L over term will be VERY low (like $20-$30) depending on the amount you need and #2 the buy term and invest the rest strategy has been disputed and debunked several times and is typically promoted in my opinion by people/companies that have limited experience/knowledge of ALL aspects of financial planning and the full benefits of insurances other than term.
There are several pro’s and con’s to both depending on your situation and needs. Go see a licensed insurance broker that can do a proper needs analysis, explain the differences between term and U/L (and offers both…not just one or the other or they will squeeze you into their mold to sell you on the only thing they offer) as applicable to your situation and then shop the market for the best offers that suit you exact needs (go to a broker…make them do the work of shopping around instead of doing it on your own).