Life Insurance: Universal vs Term

» Posted by on Aug 18, 2011 in Retirement Planning | Comments Off on Life Insurance: Universal vs Term

As a young man, I remembered being visited by Life Insurance Agents who told me how much life insurance I should have, but were not able to tell me the reason for their recommendations. These agents were usually about the same age as my parents and were members of the Great Generation who had endured the Great Depression and World War II and so I was not comfortable demanding an explanation for their recommendations.

(The Wade Agency will perform a calculated projection of how your current retirement plans are likely to play out under the best and the worst of circumstances. There is no charge for this service and the projection can be run again anytime your circumstances change. Just contact us to set up an appointment).

When I decided to become an insurance agent, I purposed to always be prepared to explain my suggestions and recommendations.

If I recommend life insurance or my client expresses interest in life insurance, it’s very important that we understand the client’s goals.

If a client’s family cannot financially afford the loss of the income produced by one family member for a finite period time, a term life  policy may be morer suitable than a universal life policy. A term policy is likely to be the most affordable way to replace that person’s income if the coverage is needed for a finite period of time. The assumption would be that by the end of the period for which the policy is in effect, the family would be able to manage without the income that the insured person produces.


When may Universal life insurance be a good idea?


Uiversal Life Insurance is a more expensive way to get a death benefit, which is paid to designated beneficiaries in the event of the insured’s death but it has the advantage of being permanent. So what are some conditions under which a uiversal life policy is appropriate?

  • When you would like to pass an amount that is much larger than your premium as a tax-free legacy to your heirs, a charity or institution, you might want to consider a Universal Life policy.
  • When you would like an amount that is much larger than your premium to be available to pay for Long Term Care, or available as a tax free wealth transfer to your heirs if you don’t encounter Long Term Care Expenses, you might want to consider a Universal Life policy. Many universal  life policies offer access to part or all of the death benefit to pay for Long Term Care while the insured is still alive. Such a feature can protect the insured and the insured’s family from catastrophic expenses and severe emotional stress.
  • When you would like to withdraw the accumulated value of a Permanent Life Policy as Tax Advantaged Retirement Income, you might want to consider a Universal Life policy.

A Universal Life policy is likely to require that the insured  undergo underwriting so the Insurer can manage the risk. Typically, the advantages of a permanent life policy, like most life insurance policies are not available if the insured is not in good health.

As with any type of retirement funding instrument, a Universal Life  policy should be evaluated in the context of your entire retirement plan.

Today’s technology has given us the ability to perform a confidential calculated projection of how a retirement plan will play out according to our client’s goals and other considerations. The process of loading a client’s data into the projection system is relatively simple, once the client’s data is gathered. The output of from the system is complete and easy to understand. We can test the projected performance of our client’s retirement plans based on hypothetical situations such as one or two major market downturns or the need for Long Term Care for a client or a client’s spouse.

We do not charge for the calculated projection service.


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