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Term vs Whole Life Insurance

If you’re shopping for life insurance, you have three main choices: term life insurance, whole life insurance, and universal life insurance.

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What Is Term Life Insurance?

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Term life insurance is temporary life insurance coverage. It’s designed to last during a set period of time and terminate when you no longer need it. Term life insurance is the most affordable type of life insurance and can be adjusted to fit most budgets.

Term life insurance has length options from 5 to 40 years. Term life insurance coverage amounts range from $50,000 to over $65 million. If you die within the active term period, the insurer will pay the policy’s death benefit to your beneficiary(ies).

What is convertible term life insurance?

Most term life insurance policies contain an option for you to convert the policy into a permanent life insurance policy. One of the benefits of this is that you won’t have to provide evidence of insurability when you convert. This means not having to go through another medical exam. However, the premiums when you convert life insurance policies will increase drastically. This is because you’ll now be paying permanent life insurance pricing which is much higher than term life insurance pricing.

A term life insurance conversion option is beneficial to those who may want lifelong insurance protection but cannot initially afford the higher premiums. Conversion options are also beneficial to those who are undecided regarding their life insurance needs. They can opt to purchase inexpensive term life insurance in the meantime and have the ability to change their mind later.

Life insurance companies often put a time limit on how long the conversion option is available. If the time period has expired and you still want to convert your life insurance policy, most insurance companies allow this with evidence of insurability.

How much does term life insurance cost?

These tables show the estimated cost of a term life insurance policy broken down by term length, age, gender, and face amount. These are monthly premium quotes for a healthy non-smoker. Your final price is determined by your individual risk factors and may be higher or lower than these quotes.

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10 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$8.49$12.81$16.77$22.57$31.99$72.24$139.32
25$8.49$12.81$16.77$22.57$31.99$72.24$139.32
30$8.49$12.81$16.87$22.73$31.99$72.24$139.32
35$8.60$12.81$17.48$23.64$34.57$78.69$152.22
40$9.63$15.20$24.94$34.83$47.73$111.58$218.01
45$11.20$20.25$32.25$45.79$66.65$158.88$312.61
50$15.03$27.50$47.64$68.88$92.88$224.46$443.76
55$20.81$41.80$70.26$102.81$134.59$328.73$652.31
60$31.35$65.92$116.53$172.21$227.38$560.72$1,116.28
65$52.58$109.65$196.72$292.50$384.68$953.95$1,902.75
70$87.54$184.04$333.25$497.29$674.67$1,678.93$3,352.71
75$155.59$357.11$647.26$968.32$1,535.93$3,832.08$7,659.00
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$6.88$8.60$11.95$15.35$18.29$37.98$70.79
25$6.88$8.60$11.95$15.35$18.29$37.98$70.79
30$6.88$8.78$11.95$15.35$19.26$40.41$75.65
35$7.05$9.89$14.62$19.35$25.37$55.68$106.21
40$8.00$12.25$18.49$25.15$33.11$75.03$144.91
45$9.96$15.69$25.41$35.54$46.87$109.43$213.71
50$12.63$22.47$37.19$53.21$69.23$165.33$325.51
55$17.11$33.67$57.62$83.85$115.58$281.22$557.28
60$25.63$56.33$87.63$128.87$166.32$408.07$810.98
65$46.96$109.65$187.05$277.99$349.16$865.16$1,725.16
70$75.92$182.05$333.25$497.29$558.40$1,388.25$2,771.35
75$145.94$357.11$538.36$804.96$1,234.53$3,078.58$6,152.01
15 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$8.49$12.81$16.77$22.57$31.99$72.24$139.32
25$8.49$12.81$16.77$22.57$31.99$72.24$139.32
30$8.49$12.81$16.90$22.77$31.99$72.24$139.32
35$8.60$12.81$20.21$27.73$35.47$80.95$156.73
40$9.63$15.89$26.62$37.34$50.31$118.03$230.91
45$13.33$22.23$37.95$54.35$68.20$162.75$320.35
50$18.29$32.21$57.15$83.14$106.35$258.14$511.12
55$25.72$48.33$87.63$128.87$170.19$417.74$830.33
60$38.41$77.83$146.80$217.62$284.99$704.75$1,404.33
65$68.68$140.39$269.78$402.09$539.65$1,341.38$2,677.61
70$122.44$260.92$495.71$740.98$966.86$2,409.42$4,813.68
75$280.19$610.16$1,172.54$1,756.23$2,290.02$5,717.31$11,429.47
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$7.37$9.67$13.93$18.32$20.00$42.25$79.34
25$7.37$9.67$13.93$18.32$20.00$42.25$79.34
30$7.48$9.82$13.93$18.32$20.12$42.57$79.98
35$7.53$10.32$15.04$19.99$25.37$55.68$106.21
40$8.94$12.99$20.81$28.64$36.55$83.63$162.11
45$11.63$17.63$29.15$41.15$53.23$125.34$245.53
50$14.74$25.61$46.06$66.51$88.92$214.57$423.98
55$20.32$37.02$68.89$100.75$137.08$334.97$664.78
60$29.32$56.33$99.76$147.06$228.59$563.73$1,122.30
65$57.02$134.80$246.39$367.00$436.88$1,084.46$2,163.76
70$102.34$242.30$451.50$674.67$911.93$2,272.07$4,538.99
75$192.17$462.25$871.18$1,304.19$2,206.24$5,507.87$11,010.58
20 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$9.00$12.97$19.57$26.77$31.99$72.24$139.32
25$9.00$12.97$19.57$26.77$31.99$72.24$139.32
30$9.03$13.05$20.00$27.41$36.33$83.10$161.03
35$9.12$13.87$22.57$31.28$41.11$95.03$184.90
40$10.89$19.01$32.68$46.44$54.74$129.11$253.05
45$16.03$27.78$48.64$70.38$91.05$219.88$434.60
50$22.21$40.44$73.52$107.70$141.41$345.78$686.40
55$33.61$63.38$118.29$174.86$227.85$561.88$1,118.60
60$53.07$110.28$204.89$304.76$411.08$1,019.96$2,034.76
65$98.52$208.55$394.31$588.88$781.74$1,946.61$3,888.06
70$206.22$409.45$800.61$1,198.34$1,537.62$3,836.32$7,667.47
75N/AN/AN/AN/AN/AN/AN/A
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$8.23$11.39$16.58$22.28$24.27$52.94$100.71
25$8.23$11.39$16.58$22.28$24.27$52.94$100.71
30$8.23$11.61$17.37$23.48$25.98$57.22$109.27
35$8.49$12.04$18.29$24.85$32.89$74.50$143.83
40$10.20$15.39$25.20$35.22$46.96$109.65$214.14
45$13.25$22.51$38.40$55.02$75.03$179.85$354.53
50$18.09$32.21$58.35$84.95$110.42$268.32$531.48
55$25.04$48.50$85.49$125.66$167.27$410.43$815.71
60$36.87$78.83$150.93$223.82$294.55$728.63$1,452.11
65$82.39$183.18$349.25$521.29$705.20$1,755.26$3,505.36
70$163.72$382.27$729.71$1,091.98$1,405.24$3,505.36$7,005.56
75N/AN/AN/AN/AN/AN/AN/A
25 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$11.41$16.27$25.13$35.11$43.94$102.10$199.04
25$11.41$16.27$25.13$35.11$43.94$102.10$199.04
30$11.62$16.95$26.41$37.03$46.50$108.51$211.87
35$12.24$18.42$30.27$42.83$53.46$125.91$246.67
40$15.17$24.88$43.08$62.04$88.57$213.68$422.20
45$20.58$38.20$68.46$100.11$128.35$313.14$621.11
50$30.79$57.67$106.72$157.51$202.02$497.30$989.45
55$55.13$101.57$193.04$286.97$367.13$910.08$1,815.00
60$98.21$194.11$372.85$556.70$699.18$1,740.21$3,475.26
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$9.96$13.77$21.07$29.02$35.39$80.73$156.29
25$9.96$13.77$21.07$29.02$35.39$80.73$156.29
30$10.23$14.38$22.56$31.26$37.95$87.14$169.12
35$10.54$16.23$25.72$36.00$44.88$105.45$203.75
40$13.42$20.82$34.93$49.81$63.49$150.99$296.82
45$16.80$30.06$52.49$76.16$97.61$236.29$467.42
50$24.55$43.74$79.65$116.90$147.59$361.24$717.32
55$39.98$74.22$140.08$207.54$261.11$645.03$1,284.90
60$70.07$132.25$254.27$378.82$483.41$1,200.78$2,396.39
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
30 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$12.79$18.49$30.96$43.86$51.40$120.76$236.37
25$12.79$18.49$30.96$43.86$51.40$120.76$236.37
30$12.99$19.56$32.21$45.73$56.67$133.94$262.73
35$13.93$22.02$37.11$53.08$65.91$157.03$308.89
40$18.26$29.41$53.45$77.59$102.77$249.19$493.21
45$24.21$44.29$80.54$118.23$159.27$390.44$775.72
50$36.81$69.83$129.77$192.08$288.96$714.66$1,424.16
55$68.63$123.63$239.68$356.94$471.62$1,171.32$2,337.48
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$11.18$15.48$24.70$34.47$40.42$93.31$181.45
25$11.18$15.48$24.70$34.47$40.42$93.31$181.46
30$11.52$16.73$27.13$38.12$46.44$108.36$211.56
35$11.97$19.01$31.39$44.50$55.04$129.86$254.56
40$15.88$24.49$42.44$61.08$77.14$185.11$365.07
45$19.71$35.17$62.95$91.85$118.16$287.67$570.18
50$28.90$52.20$96.68$142.44$196.94$484.61$964.06
55$50.83$90.52$171.74$255.03$335.74$831.62$1,658.08
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
35 Year Term Life Insurance Monthly Rates
Male Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$15.29$22.35$37.52$53.70$62.75$149.13$293.11
25$15.29$22.35$37.52$53.70$62.75$149.13$293.11
30$16.66$23.84$39.23$56.26$70.44$168.36$331.56
35$17.00$26.41$47.66$68.91$98.39$238.23$471.29
40$22.73$43.93$80.52$118.21$156.27$382.93$760.71
45$31.03$67.23$125.33$185.42$241.97$597.18$1,189.19
50$50.36$116.96$220.15$327.64$434.50$1,078.50$2,151.84
55N/AN/AN/AN/AN/AN/AN/A
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$13.93$18.07$29.40$41.52$49.07$114.93$224.71
25$13.93$18.07$29.40$41.52$49.07$114.93$224.71
30$13.93$19.57$32.82$46.65$57.62$136.31$267.46
35$15.21$22.78$37.95$54.35$68.73$164.09$323.01
40$19.40$29.83$54.50$79.17$112.99$274.73$544.29
45$24.44$47.14$89.12$131.10$173.08$424.96$844.76
50$38.97$89.53$168.07$249.53$324.44$803.35$1,601.55
55N/AN/AN/AN/AN/AN/AN/A
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
40 Year Term Life Insurance Monthly Rates
$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$17.01$25.23$42.80$61.62$71.97$172.19$339.23
25$17.01$25.23$42.80$61.62$71.97$172.19$339.23
30$19.24$28.67$52.18$75.69$102.57$248.69$492.21
35$20.21$34.83$64.49$94.16$135.94$332.10$659.04
40$27.73$61.58$114.14$168.63$222.63$548.85$1,092.53
45$41.93$97.08$188.99$280.91$370.06$917.42$1,829.68
50N/AN/AN/AN/AN/AN/AN/A
55N/AN/AN/AN/AN/AN/AN/A
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A
Female Age$100,000$250,000$500,000$750,000$1,000,000$2,500,000$5,000,000
20$15.52$20.58$33.98$48.39$57.12$135.07$264.98
25$15.52$20.58$33.98$48.39$57.12$135.07$264.98
30$15.82$22.61$38.48$55.13$72.63$173.83$342.50
35$17.58$28.95$52.74$76.53$93.12$225.06$444.97
40$23.27$48.96$91.26$134.31$176.84$434.35$863.55
45$34.18$77.71$145.15$215.14$288.87$714.43$1,423.70
50N/AN/AN/AN/AN/AN/AN/A
55N/AN/AN/AN/AN/AN/AN/A
60N/AN/AN/AN/AN/AN/AN/A
65N/AN/AN/AN/AN/AN/AN/A
70N/AN/AN/AN/AN/AN/AN/A
75N/AN/AN/AN/AN/AN/AN/A

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What Is Whole Life Insurance?

Whole life insurance is life insurance coverage that lasts your entire life. As far as permanent life insurance plans go, whole life insurance is the least complex. As long as the policy is kept active, the life insurance company pays your beneficiary(ies) the policy’s death benefit no matter when you die.

Whole life insurance is typically about 10-15 times more expensive than its term life insurance counterpart. This is because of its lifelong coverage, savings component that builds cash value, and dividends. Whole life insurance coverage amounts range from $10,000 to over $65 million. This is the amount your beneficiary(ies) receive upon your death.

How much does whole life insurance cost?

These tables show estimated monthly costs for a whole life insurance policy by age, gender, and face amounts for healthy non-smoking applicants.

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Whole Life Insurance Monthly Rates
$250,000$500,000$1,000,000
Male age 30 $258.63 $510.66 $1,014.72
Female age 30 $227.07 $447.54 $888.47
Male age 40 $374.10 $741.60 $1,476.59
Female age 40 $324.60 $642.60 $1,278.60
Male age 50 $567.39 $1,128.19 $2,249.77
Female age 50 $483.52 $960.43 $1,914.27

What are whole life insurance cash values?

Whole life insurance has a savings component that builds cash value, which can be used in a number of ways.

Cash values in a whole life insurance policy can be used as:

  • Policy loans
  • Surrender value for cash
  • Paid-up insurance
  • Extended term life insurance

What are whole life insurance dividends?

A whole life insurance policy can be participating or nonparticipating. If it’s participating, you participate in the favorable outcomes of the insurer’s investment returns and/or lower than anticipated operating costs.

Your whole life insurance policy rewards come in the form of dividends, usually paid out annually by the insurance company. You have options as to how you prefer to receive and/or use these dividends for your whole life insurance policy.

Whole life insurance dividends can be:

  • Received as cash
  • Used to reduce your premium payments
  • Used to buy fully paid-up insurance
  • Left with the insurance company to earn you interest (like a savings account)
  • Used to buy term life insurance
  • Used to overpay your premiums and make your policy paid-up faster than planned.

Participating whole life insurance policies have slightly higher premiums than nonparticipating whole life insurance policies. This is because the insurance companies have an intent to return part of the premium in the form of dividends. However, dividend amounts cannot be guaranteed.

Policy Loans with Whole Life Insurance

You can request confidential loans from the life insurance company. This can be for any amount as long as the total as well as the accrued interest does not exceed the cash value. If the outstanding balance plus interest ever exceeds the cash value amount, the policy will terminate.

These loans do not need to be paid back during your lifetime. But if you die with outstanding loans, the insurer will take this amount plus interest from your death benefit total.

Some whole life insurance policies also feature an automatic premium loan. This gives you the option to pay any premium as a loan against the cash value. This loan is the same as a regular policy loan. It accrues interest and if the cash value becomes depleted, the policy will terminate.

Surrender Values for Whole Life Insurance

A whole life insurance policy may be surrendered or cancelled at any time and you can receive its cash value. This is a useful option if you need a source of cash, but it does end your insurance coverage. And the policy cannot be reinstated. There may be surrender fees if the policy has not been active very long. The surrender fees decrease as the years go by and typically disappear after 10 or 20 years.

Paid-Up Insurance for Whole Life Insurance

Instead of surrendering a whole life insurance policy for cash, you can opt to surrender it for a paid-up whole life policy. A paid-up policy means that it’s fully paid up coverage that you don’t have to pay premiums for. The new coverage amount on the paid-up policy is whatever amount your cash value can purchase as a single premium. How much the policy costs will be based on your current age.

Extended Term Life Insurance

Another option is to surrender the whole life policy and use the cash value to purchase a paid-up term life insurance policy. The coverage amount of the new term policy is whatever your whole life insurance policy face amount was (minus any loan balance).

The term length of the new policy is whatever can be purchased with the cash value as a single premium (minus any loan balance). How much the term policy costs will be based on your current age.

This option isn’t a popular choice for individuals unless they are terminally ill and need a quick source of cash. The policyowner can withdraw a portion of the cash value then surrender the policy for a paid-up term policy knowing they will not be living much longer.

Difference Between Term and Whole Life Insurance

The biggest differences between term life insurance and whole life insurance are how long their protection lasts and how much they cost.

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Term Life InsuranceWhole Life Insurance
Coverage length5, 10, 15, 20, 25, 30, 35, or 40 yearsEntire life
Coverage amount$50,000 – $65M+10,000 – $65M+
Cost$ can fit into most budgets$$$ can fit into some budgets
Features
  • Fixed premiums (won’t increase or decrease)
  • Fixed death benefit (proceeds paid to beneficiaries won’t change)
  • Can convert into a whole life policy
  • Optional riders available for additional benefits
  • Fixed premiums (won’t increase or decrease)
  • Some policies can have increasing death benefits
  • Some policies have dividend payouts
  • Cash value can accumulate to substantial amounts that allow for withdrawal and loan options
  • Optional riders available for additional benefits

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Which Is Better: Term or Whole Life Insurance?

Quotacy life insurance for the family

The main goal of life insurance is to protect your loved ones during their most financially-vulnerable years. In most cases a life insurance policy that you only pay for during that period of time would make the most economical sense.

Whether you should buy term life or whole life insurance depends on your lifestyle and financial goals. Most families only need term life insurance, but whole life insurance has its benefits.

Term life insurance may be the better option if you:
 

  • Are financially responsible. Term life insurance is designed to protect your loved ones during your prime earning and providing years. Term life insurance policies are meant to drop off later in life when your debt is lower, and your net worth is higher.
  • Are on a tight budget. Term life insurance is simple income replacement so it’s fairly inexpensive compared to other life insurance plans. Even a small $100,000 term life insurance policy can go a long way for a family who unexpectedly loses a provider.
  • Have loans. Term life insurance is ideal if you have outstanding loans because you can specify how long you want coverage for. Your term policy is financial back-up should you die before the loan is paid off and can ensure the obligation does not fall to your loved ones.

The main goal of life insurance is to protect your loved ones during their most financially-vulnerable years. In most cases a life insurance policy that you only pay for during that period of time would make the most economical sense.

Whether you should buy term life or whole life insurance depends on your lifestyle and financial goals. Most families only need term life insurance, but whole life insurance has its benefits.

Whole life insurance may be the better option if you:
 

  • Care for a loved one with a disability or special needs. If you have dependents who will rely on you long-term, then a whole life policy would be better. Term life insurance is temporary, but whole life insurance can last as long as you need it to.
  • Are not a financially disciplined. Term life insurance is inexpensive so, for most people, it makes sense to own term and put the difference into savings or investments. However, this only works if you actually save. If you are not great at putting away money, a whole life insurance policy can force you into saving. Whole life insurance policies build cash value that you can borrow or withdraw from should you need it.
  • Have a sizable estate. As of 2019, the estate tax lifetime exclusion amount is $11.4 million. In other words, an individual may gift or transfer up to $11.4 million throughout their entire life time (and at death) without incurring any gift or estate tax. However, if your estate is worth more than this, whole life insurance can provide money to your heirs to pay estate taxes so they are not forced to sell off parts of the estate.
  • Own a family business. If you have a family business and not all of your children are interested in taking over, the proceeds from a whole life insurance policy can equalize an inheritance. The business can be left to the children who are interested and leave the death benefit for the children who are not.

Buying Term Life Insurance and Whole Life Insurance

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If you want lifelong protection but can’t afford a large whole life insurance policy, laddering policies is a great strategy. This is when you buy more than one life insurance policy to cover various needs.

Purchase the amount of term life insurance that will cover all your debt and financial responsibilities. And choose a long enough term length to protect your family until all or a majority of your debt is paid off. Then also purchase a small whole life insurance policy to simply pay for your end-of-life expenses. This may include your funeral or to leave behind an inheritance.

Example:

Anna is 30 years old. She’s an assistant account executive at an established advertising firm. She contributes 6% of every paycheck to her 401(k).

At 32, Anna gets married. She and her husband each purchase a $500,000 30-year term life insurance policy naming one another primary beneficiaries. Her premiums are $30 per month.

At 33, she and her husband also each purchase a $50,000 whole life insurance policy naming one another primary beneficiaries. Her premiums are $51 per month.

When Anna is 34, they have their first child.

At 35, Anna and her husband buy their first home. In this same year, she’s promoted to account executive and receives a raise. She also opens an IRA account and contributes $200 to it each month.

When Anna is 36, they have their second child.

At 53 years old, Anna’s $50,000 whole life insurance policy has a cash value of $12,221. If she desired, Anna could withdraw funds up to this amount via policy loans.

At age 55, Anna and her husband are officially empty nesters.

At age 60, she and her husband send in their last mortgage payment.

At age 62, their term life insurance policies end. Their whole life insurance policies are still active.

At age 67, Anna retires.

32 and 62, her husband would receive benefit checks of $500,000 and $50,000 (minus any policy loans and interest, if any).

Considering this example, if Anna died unexpectedly any time between the ages of 32 and 62, her husband would receive benefit checks of $500,000 and $50,000 (minus any policy loans and interest, if any). If Anna outlived her term life insurance policy, her husband would receive the whole life insurance policy’s death benefit of $50,000 (minus any policy loans and interest, if any) whenever she died. If her husband dies before Anna or at the same time as Anna, the $50,000 would go to the contingent—or back up—beneficiary.

What Is Universal Life Insurance?

Universal life (UL) insurance is a type of permanent life insurance that features flexible premiums and the option to have an increasing death benefit. A universal life insurance policy is designed to meet the changes in a person’s life. It can be aggressively funded if the policyowner has the capability and during times of tightened budgets, premium payments can be reduced or suspended altogether. The death benefit can also be increased or decreased if needed.

Universal Life Insurance Flexible Premiums

Nearly every universal life insurance policy comes with a target premium amount. This is the amount that, if paid at regular intervals, would be enough to keep the policy active until it’s fully mature (typically age 121). This target premium is only a suggestion and the policyowner is not actually required to pay this amount.

With a universal life insurance policy, policyowners can choose to prefund their policy (pay a large premium amount early on) and then not worry about paying premiums again for years. This is possible because the large up-front payment grows the policy’s internal cash value and as long as there is an adequate amount of cash value to cover at least 60 days of the policy’s expense and mortality charges, your coverage will remain active without being required to make payments.

Unlike other life insurance products, universal life insurance policyowners also have the ability to make additional premium payments at any time without prior consultation with the insurance company. Policyowners can also skip payments and pay less premium amounts than the suggested premium amount.

Many insurance companies offer no-lapse guarantees with their universal life insurance policies. This provision assures policyowners that the coverage will continue as long as the target premium is met or the policy cash value exceeds a specific amount.

Note: The flexible premium feature requires responsible monitoring. If you don’t pay attention to your universal life policy, it may terminate due to inadequate premium payments or you may lose your guarantees such as the no-lapse guarantee.

Death Benefit Options on Universal Life Insurance

Universal life insurance gives policyowners two death benefit options: level or increasing.

The level death benefit option is similar to a traditional whole life insurance policy. The death benefit stays the same while cash value can fluctuate.

With the increasing death benefit option, as the policy’s cash value grows so does the death benefit. The premiums required for this option are understandably higher.

With a universal life insurance policy, policyowners can make withdrawals without accruing interest (unlike whole life insurance). Withdrawals reduce both the cash value and the death benefit.

Difference Between Universal and Whole Life Insurance

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Universal Life InsuranceWhole Life Insurance
Coverage lengthLifelongLifelong
Cash valueYes, fluctuates with market interest ratesYes, grows steadily with guaranteed interest rate
PremiumsFlexibleFixed
Death BenefitLevel or IncreasingLevel (can increase with paid-up additions via dividends)
Features
  • Flexible premiums
  • Adjustable death benefit
  • Cash value can accumulate to substantial amounts that allow for withdrawal and loan options
  • Partial withdrawals don’t accrue interest
  • Some policies have dividends
  • Fixed premiums (won’t increase or decrease)
  • Some policies can have increasing death benefits
  • Some policies have dividend payouts
  • Cash value can accumulate to substantial amounts that allow for withdrawal and loan options

What Is Guaranteed Universal Life Insurance?

Universal life insurance and guaranteed universal life (GUL) insurance are quite different. Guaranteed universal life insurance is essentially a term life insurance policy that can last your entire life.

Guaranteed universal life insurance has a set death benefit amount that lasts your lifetime at a much lower cost than whole life insurance. The premiums for guaranteed universal life insurance are less expensive because it does not come with fancy extras such as dividends or aggressive cash accumulation.

Some guaranteed universal life insurance policies offer policyowners the option to decrease your death benefit if needed. And some guaranteed universal life insurance policies offer a return of premium option. The specifications of these features vary depending on the policy.

How much does guaranteed universal life insurance cost?

These tables show estimated monthly costs for a guaranteed universal life insurance policy by age, gender, and face amounts for healthy non-smoking applicants.

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Guaranteed Universal Life Insurance Monthly Rates
$250,000$500,000$1,000,000
Male age 30$108.90$205.99$352.94
Female age 30$90.81$171.66$305.96
Male age 40$144.26$270.96$505.58
Female age 40$117.80$223.08$424.09
Male age 50$219.56$418.03$775.92
Female age 50$183.52$355.62$676.61

Who should consider guaranteed universal life insurance?

Most families only need term life insurance, but guaranteed universal life insurance is a good option for individuals who want lifelong protection but their budget won’t allow for traditional universal life insurance or whole life insurance.

Consider buying guaranteed universal life insurance if you:

  • Have a special needs dependent
  • Have a small business
  • Have debt that is expected to last until or into retirement
  • Need estate tax protection
  • Want to leave an inheritance
  • Are older and your term policy ended but you still want coverage.

Difference Between Guaranteed Universal and Term Life Insurance

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Guaranteed Universal Life InsuranceTerm Life Insurance
Coverage lengthLifelong5, 10, 15, 20, 25, 30, 35, or 40 years
Cost$$ can fit into some budgets$ can fit into most budgets
Features
  • Potential return of premium if you cancel the policy
  • Option to decrease coverage amount
  • Fixed premiums (won’t increase or decrease)
  • Fixed death benefit (proceeds paid to beneficiaries won’t change)
  • Can convert into a whole life policy
  • Optional riders available for additional benefits

» Learn more: What Is Guaranteed Universal Life Insurance?

Questions? Talk with our experienced advisors.

Buying Term Life Insurance and Guaranteed Universal Life Insurance

Quotacy life insurance for the family

Term life insurance is a great product for families. It’s affordable and provides protection for your loved ones during their most financially-vulnerable years. However, if you want life insurance to last until you die not if you die, term life insurance isn’t going to cut it.

One option is to ladder different life insurance policies. Purchase a term life insurance policy with enough coverage to replace approximately 10 times your income and pay off all the big ticket items if you died unexpectedly. Then, in addition, buy a small guaranteed universal life insurance policy to provide funds for your funeral, end-of-life expenses, and a small inheritance.

Example:

Sam Johnson is 35 years old. He’s married, has two young children, and is a homeowner.

He’s healthy and plans on living for a long time, but should the unexpected happen, he wants to ensure his wife and their children can remain in their home and that their children can attend college without financial struggle.

He hopes to live a long, happy life and die peacefully in his bed at an old age. If this happens, he still wants to leave behind supplemental income for his wife and some money for his children.

Sam can accomplish his goals by purchasing both a term life insurance policy and a guaranteed universal life insurance policy.

He purchases a $750,000 30-year term life insurance policy for $55 per month and also buys a $150,000 guaranteed universal life insurance policy for $100 per month.

If Sam dies before he turns age 65, his family receives $900,000 in total death benefit proceeds. If he lives past age 65, his family will receive $150,000 no matter what age he dies.

For advice or to start a life insurance quote, contact Quotacy

Whether you should buy term life insurance, whole life insurance, universal life insurance or more than one type is up to you. Being informed and knowing the differences and benefits of term vs whole life insurance vs universal life insurance is the best place to start.

If you need further advice, contact Team Quotacy at any time. If you’re ready to get a term life insurance quote or guaranteed universal life insurance quote start here. If you want a customized whole life insurance quote start here.