We need to Understand there is a difference between life insurance and universal life insurance is important. Many people only think of whole life versus term life, and then tend to be confused with additional requirements such as “universal.” Basically, universal life insurance is a type of whole life insurance. So the difference is very similar to that of the whole life insurance policy term life policies and standards. Below is the main difference between a standard term life and (especially) the universal policy.
The first noticeable difference is that term life insurance is for a set amount of time, and universal life insurance for the entire life of the insured. However, two other major differences that distinguish them from one another.
Cash Value Differences
Universal life insurance allows for accounts to be set aside for the policy. Part of the premium paid is used as a tax-deferred savings account that accumulates interest. This account can be used to establish a pension fund, increasing the death benefit, and, once there is enough in the account, to pay premiums. That means that, if money is an issue strictly as a cash value is high enough, the insured will not lose insurance coverage, because cash can be used to pay for most, if not all, of the premium dues.
This is what determines the universal life insurance other than life insurance. Term life insurance has no cash accounts, and premiums paid only go in the direction of policy. If the term expires and the insured is still alive, then the money will not come back (no refund) and policies will need to be updated or rolled into a type of whole life policy.
the cost difference
Striking differences in cost between the two types of insurance. Term life insurance allows for a large number of survivors benefits to be purchased (to several million dollars) for the amount of premiums affordable. Universal life insurance is much more expensive, especially in the early life of the policy. However, the benefits that are received later can make up for the initial cost. This is more of an investment distance when considering universal life policy.