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Universal Life vs. Term

A simple illustration can be used to show the basic difference between Universal Life and Term Life.
Universal Life is like owning a home;
Term Life is like renting a home.
Term Life guarantees a level death benefit and level premium for a limited time (1, 5, 10, 15, 20, 25 or 30 years). Term Life does not build cash value, just as tenants do not build equity in in a rented home.

Due to the low premium, Term Life allows you to purchase the most insurance for your money.

Universal Life may guarantee a permanent death benefit and permanent level premium.

Universal Life builds cash value just as a home builds equity. The cash value may eventually be used to lower the premium or to pay for education, supplement retirement, etc.

The cash value accumulates tax-deferred.

Only Universal Life and Whole Life offer a guaranteed permanent death benefit with a level premium.

Alternative:
Term with ROP (Refund of Premium) is an attractive compromise* since all premiums are refunded tax-free at the end of the term.

* Term with ROP cannot be compared with Universal or Whole life insurance since no cash value is accumulated and the death benefit is only temporary. However, term with ROP will refund all premiums paid at the end of the term.


 

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