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Term life insurance coverage ends after a specified period of time, while universal life covers you as long as you pay your premiums. Compare these two life insurance options, thinking about your family’s financial needs as well as your budget and how long you want coverage.
Both policies offer a death benefit once you die, but the main differences come down to how long the coverage lasts, and its ability to build cash value.
These are the key features for term vs universal life insurance.
Term life insurance | Universal life insurance | |
---|---|---|
Usually easy to buy | ✔ | |
More affordable | ✔ | |
Choose how long your coverage lasts | ✔ | |
Lifelong protection | ✔ | |
Fixed premiums | ✔ | |
Flexible premiums | ✔ | |
Builds cash value | ✔ | |
Investment component | ✔ | |
No-medical-exam policies available | ✔ | ✔ |
Choose |
Term life insurance is the simplest and cheapest most affordable type of life insurance. You pay a fixed premium for a set number of years. If you die during the policy, your beneficiary will receive a death benefit.
Universal life is a permanent policy, offering lifelong coverage as long as you keep paying your premiums. The major difference between universal life and other permanent policies is that the payments are flexible.
Like term life, universal life offers a tax-free death benefit. However, it’s more of an investment. A portion of each premium is invested to give your policy a cash value. Once you build up sufficient savings, you can tap into your policy during your lifetime.
Since term life insurance is temporary and has no monetary value while the policyholder is alive, it’s the much cheaper option of the two. Universal life insurance is more expensive because it offers lifelong protection and has a built-in cash value component, making it an investment product.
Average | Man | Woman |
---|---|---|
20 | $26.19 | $20.32 |
25 | $24.55 | $20.65 |
30 | $25.40 | $21.20 |
35 | $26.99 | $22.65 |
40 | $35.56 | $31.03 |
45 | $54.28 | $45.41 |
50 | $84.34 | $66.28 |
55 | $135.75 | $100.17 |
60 | $242.82 | $167.53 |
65 | $469.31 | $311.41 |
To compare, here’s how much you can expect to pay in monthly premiums for a universal life insurance policy.
Average | Man | Woman |
---|---|---|
20 | $146.32 | $121.38 |
25 | $170.25 | $144.95 |
30 | $205.01 | $175.13 |
35 | $243.01 | $211.12 |
40 | $290.23 | $252.41 |
45 | $345.24 | $293.71 |
50 | $432.14 | $373.91 |
55 | $559.90 | $480.54 |
60 | $718.81 | $620.52 |
65 | $966.86 | $823.59 |
*Sample rates sourced from three major life insurance companies in the US, and are valid as of January 2021.
Deciding between universal or term life insurance depends on your financial situation and lifestyle.
Yes. You can ladder your insurance, or hold two or more life insurance policies at the same time. When you apply for additional coverage, be prepared to explain why you want more coverage and be ready to show proof that you can pay for both.
These are some of the reasons why you might want to purchase both term and universal life insurance:
When you’re deciding between term vs universal life insurance, think of your financial obligations and goals. If you have short-term needs or a tight budget, a term life policy can offer protection and security for a specified period of time. If you’re interested in treating life insurance as more of an investment, you might want to look into a cash value policy like universal life.
Once you’ve settled on a policy, compare insurers to make sure you’re getting the most value for your money.
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