What can these have in common, you might ask? When purchasing term life insurance policy you might as well compare it to leasing a vehicle. You can make use of the car all the period you pay the leasing and once you end up this period you give up this car. The same goes for term life insurance while you pay the premiums set for the policy.
On the other hand, when you purchase a whole or permanent life insurance, all you do you are accumulating more value on the specific policy. The same goes with purchasing a car, you become the owner of a valuable asset.
There is however a difference: while the insurance policy increases in value over the years, the value of the car decreases more the years pass by. With insurance policies, you will see that their name is received in accordance with the way they gain more value. Therefore you will find whole life insurance, universal policies, and variable universal life insurance plan.
- With the whole life insurance, you will be set with premiums as well as death benefits that are generally the same throughout the payment of the policy, as long as this policy is in effect, that is!
- Universal life insurance plan go with the same features from above only that they can be adjusted if this is what the policyholder desires. This will increase a declared amount which can be variable on occasion.
- The variable life insurance policy goes by adjustable premium and death benefits. With a death benefit increasing, you must prove with your medical records or any other information that you are eligible for staying insured under these terms. The rates will increase in accordance with the investment that is decided upon. In case the policy gets lower in value, then the premiums will be raised.
If you compare all these three plans, you would have to admit that from the insurer’s point of view, the first plan – the whole life insurance – is ranked among the riskiest. The thing is that the insurer will pay the policyholder a death benefit not counting for the policy value that has accumulated. If the payments are done on time, the insurer is forced to pay the death benefits.
As to the universal policy, the risks are relatively high since the accumulating of value will set the rate that is remitted by the interest. There could be some companies setting lower interest rates just for this reason.
Lastly, the variable universal life insurance plan is the less risky one in the eyes of the insurer. The return rate in here gets changed, therefore you wouldn’t know how fast the policy increased or decreased.
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