How to Compare Term & Variable Universal Life Insurance

Term and variable universal life insurance are very different types of life insurance. There's much more to compare than just the premiums, although affordability should always factor into your insurance decision.

Term Life Insurance

Term insurance is pure protection. You pay a premium for the term period, which is anywhere from five years to 30 years. If you die during the term, the policy pays a death benefit. There is no cash value, or savings, that accumulates while you have the policy. When the term period ends you may be able to renew at a much higher rate, or the policy may end, depending on the terms of your policy. It's usually the least expensive expensive type of life insurance.

Variable Universal Life Insurance

Variable universal life insurance provides flexibility. You can vary the premiums and borrow against or withdraw the cash value that accumulates. The cash value grows based on the stocks, bonds or mutual funds chosen to invest the cash value in, and it may increase or decrease depending on market changes.

Considerations

Carefully compare the details of each policy and what you want each policy to accomplish. A short-term need, like making sure your family can cover a college education for a child if you died unexpectedly, is a great fit for term insurance. For long-term planning that can also supplement your retirement income with the cash value that accumulates, variable universal may be better.

References

• A.M. Best's Consumer Insurance Center: Term Life Insurance
• A.M. Best's Consumer Insurance Center: Variable Universal Life Insurance

Resources

• National Association of Insurance Commissioners: Ten Things To Know Before Purchasing Life Insurance