If the term, life assurance, seems strange, do not worry! You definitely know it by its more familiar name. Indeed the two concepts life assurance and insurance are more or less the same; both of them assure that life does not stop for the survivors even if the main breadwinner dies before he has been able to make other arrangements for them. In both cases, the policyholder has to qualify for the policy and pay premiums at a stipulated rate at stipulated interval to keep the policy running. If the insured dies while the policy is still running, the designated beneficiary gets a stipulated amount as death benefit. That is all.
However, if we go into the technicalities, we will find that there is a major difference between the two concepts. Technically, only those policies that promise assured return can be called life assurance policy. A term life for example does not make any such assurance and so it cannot be called assurance policy; it is a pure life insurance policy. On the other hand, a whole or universal life always provides some assured return and so we can categorize them as that.
Indeed, there are different types of life insurance policies. Although many experts today recommend only the term life for the insurance purpose, those who can afford it prefer the universal life insurance policies more. The main differences between the two are as follows:
* While term life is sold for 1/5/10/15/20/25/30 years only, universal life like all permanent policies are sold for the life of the insured.
* In term life, the premium you pay will fetch you only death benefit, nothing else. Contrarily, in the universal life policies, the premium payments above the cost of insurance are credited to the cash value of the policy and hence these policies provide investment opportunity also.
* If you do not require the coverage, a universal life can be cashed out and the proceeds can be utilized for self-insurance or any other purpose. There is no such facility available with term life.
* A term life is very reasonably priced because the entire amount you pay as premium can be utilized to meet the cost of insurance. On the other hand, the universal life is always overpriced in order to allow cash value accretion and compulsory return.
A universal life insurance can be utilized in so many ways. The estate liquidity expense and your final expense such as your burial expenses and unpaid medical bills can be covered with such a policy. Income replacements and debt coverage are two other important usages of a universal life policy. But if you can calculate the term carefully, you can cover them with term life also.
I must add that, if you go into the basics, you will find that each policy has its own set of pros and cons. You just need to see which one will suit you most. In case of term life, you need to calculate the term carefully; buying fresh coverage later in life may turn out to be financially unviable. Life insurance quote can be received online; try putting different inputs and you will understand how the policy prices increases with age or health condition.
Moreover, if you do opt for term life, you must also cultivate the habit of putting aside substantial amount every month for investment purpose. Since term life insurance rates are low, investing the difference should create big enough assets for you provided you do that regularly. Therefore, buying a term life requires you to have some financial discipline.
However, if you opt for no medical exam life insurance policies instead of fully underwritten term life policies, you may not have any difference, which you can invest. Most these no medical policies are term life and so ideally, they should have been cheaper. However, since they provide the coverage without fully determining your insurability, they remain rather risky for the carriers and so to compensate such risk, they naturally price them higher.
However, not every no medical policy guarantees coverage. For example the simplified no medical policies require you to answer some health questions and the coverage is based on your answers. However, there are guaranteed issue no medical policies too; these policies exempts you from answering those health questions as well. If you opt for graded life insurance, you can avail whole life coverage without having to appear for any medical examination or answer any health questions. There are plenty of options available. So you just need to be aware of them and then choose the one that will suit you most.
Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on life insurance ratesand life insurance online, visit his site today.
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