# Term Life Insurance Plan vs. Universal Life Plan **URL:** \ **Category:** Great Debates\ **Created:** [December 7, 2005, 1:26pm UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495 "2005-12-07T13:26:33Z")\ **Posts on this page:** 10\ **Page:** 2
**Author:** ![Yeticus\_Rex](https://avatars.discourse-cdn.com/v4/letter/y/a698b9/32.png) [@Yeticus\_Rex](https://boards.straightdope.com/u/Yeticus_Rex)\ **Post date:** [December 8, 2005, 1:33am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/21 "2005-12-08T01:33:02Z")
> [@Moonchild](#): > > The numbers in the OP are correct: > Age 39 female, non-tobacco user, TERM $33.07 per mo., $250K return on death; > UNIVERSAL LIFE $75.42 per mo., $100K return on death. > > Guess I should have mentioned in the OP that the Universal Life plan **returns all paid capital** (and a little more, actually: $27,545) when plan matures at age of 65, but said $100K return on death, even after 65. It’s a long-term 5.25% interest return. > > Term Life plan returns zero. > > I assumed this was a given with a Universal Life plan; remember, this is all new to me. The insurance agent didn’t really mention other plans, etc. I apologize for any confusion. But if you take the difference of ($75.42 - $33.07) $42.35 a month, and invest over 25 years (age 65 - 40) at 6% average (conservative) you would get $29,495.04 by the 300th month (compounded monthly interest). Past history considered, you’ll do better than 6%. So, term insurance will give enough to save at LEAST $2K more in savings (compared to the $27,545 from your matured UL policy) and you still have 2.5 times as much coverage using term than universal. If you want only $100k of term coverage, you’ll save more, but I believe it’s not proportionally more…I would stick with a $250K term policy…minimum. Term Life plan returns zero, because the money is for insurance only, since it’s not used as a savings (and hidden commissions) vehicle. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [December 8, 2005, 1:49am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/22 "2005-12-08T01:49:09Z")
This one probably needs to be aired out in a forum other than GQ. While everyone has been very good about giving factual answers(as they see them), it just ain’t in the cards. Moved to Great Debates. **samclem** GQ moderator ---
**Author:** ![Yeticus\_Rex](https://avatars.discourse-cdn.com/v4/letter/y/a698b9/32.png) [@Yeticus\_Rex](https://boards.straightdope.com/u/Yeticus_Rex)\ **Post date:** [December 8, 2005, 2:01am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/23 "2005-12-08T02:01:46Z")
> [@Weirddave](#): > > No. that’s what “Guaranteed renewable” means. However, if you get to the end of your term, the premium at which the policy will be renewed is _not_ guaranteed, and an insurance company could charge you a fortune to renew your policy if it was known that you had a major illness. This will not happen with a universal life policy. This is one of the reasons I think Yeticus Rex’s post is wrong as well as insulting. “Term life good, whole life bad” is a stupid simplification of a complex issue. I know a guy who works in our central PA office who is, bluntly, dying. He had probably 6 months to go, tops. He is also 69 3/4 years old. He also has term life insurance. In three months, his policy lapses, and his house is not paid off and he has a whole mess of bills that have accumulated since he got ill. If he dies in the next 3 months, than his wife will have money to cover all of that and a nest egg for herself. If he makes it past that, then she’ll be ruined when he dies and be forced to declare bankruptcy. Rex, you should spout your “term life good, whole life bad” nonsense at him, he’d be happy to punch you in the nose. Following that advice has him in the awful position of praying to die. An insurance professional will work with you to determine what your specific needs are and recommend the appropriate policy to meet those needs. This will not be the same policy for everyone. “Buying the cheapest policy you can find on the internet” is good advice only if you consider the person who told you to buy a Yugo in 1984 a sage individual. Almost missed this since you didn’t highlight my screen name. I answered in relation to **Moonchild’s** situation, not your co-worker’s situation. He has a different set of issues than **MC**. I would look towards [these](http://moneycentral.msn.com/content/Insurance/Insureyourlife/P35415.asp) [cites](http://www.investopedia.com/articles/pf/05/012405.asp) for his issues. My apologies if you assumed that term is a one size fits all insurance, but it is the best solution for **MC** who is 30 years younger (est.) than your co-worker. And I still wouldn’t trust an insurance salesman if I were him. I have term insurance covering the next 9 years (I’m 42 now), and by 51, I will have everything paid off (including 2 business buildings), so any insurance except for medical will not be an issue for me because I did follow the term insurance and invest rules since 1994. But of course, YMMV. And **WD** , I did not say go to an internet site for insurance…I mean to ACTUALLY go to an insurance broker and discuss your actual situation and let the broker do the footwork of checking the myriad of insurance companies for quotes…term and universal (if you wish). Don’t let one salesman from one company take your time…he’s only gonna push his products on you and try to make the greatest commission off of them. A Yugo? Really! :rolleyes: ---
**Author:** ![MrPeabody](https://avatars.discourse-cdn.com/v4/letter/m/7cd45c/32.png) [@MrPeabody](https://boards.straightdope.com/u/MrPeabody)\ **Post date:** [December 8, 2005, 4:08am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/24 "2005-12-08T04:08:38Z")
> [@Weirddave](#): > > I know a guy who works in our central PA office who is, bluntly, dying. He had probably 6 months to go, tops. He is also 69 3/4 years old. He also has term life insurance. In three months, his policy lapses, and his house is not paid off and he has a whole mess of bills that have accumulated since he got ill. If he dies in the next 3 months, than his wife will have money to cover all of that and a nest egg for herself. If he makes it past that, then she’ll be ruined when he dies and be forced to declare bankruptcy. Wierddave, Please have your friend contact his term insurance company quickly. Most term policies have a right of conversion to a whole life plan with no medical and no right to deny. if he has 6 months to live he could still get coverage for up to his full term amount. Cite [http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P373,00.html](http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P373,00.html) ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [December 8, 2005, 6:36am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/25 "2005-12-08T06:36:03Z")
> [@MrPeabody](#): > > Wierddave, Please have your friend contact his term insurance company quickly. > Most term policies have a right of conversion to a whole life plan with no medical and no right to deny. if he has 6 months to live he could still get coverage for up to his full term amount. > > Cite > [http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P373,00.html](http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P373,00.html) I believe he looked into that (we are in the insurance business after all) and it was not available, but I will mention it again, thank you. ---
**Author:** ![guyblond](https://avatars.discourse-cdn.com/v4/letter/g/977dab/32.png) [@guyblond](https://boards.straightdope.com/u/guyblond)\ **Post date:** [December 8, 2005, 7:51am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/26 "2005-12-08T07:51:25Z")
Moonchild, I’m a CPA that does a bit of retirement and estate planning. In this case I believe that Montly Crew has it right. Whole Life and or Universal Life are part life insurance part investment product. Term life is striaght life insurance. A Universal plan will have a cash value that builds as you pay for the policy. So If you don’t die before you are in retirement and use the death benefit, you can cash in the policy to spend in retirement. Problem is that the Universal life will cost you more per month for a given amount of life insurance. If you do the analysis on the return that you get on the difference that you have to pay, term life v universal life, you will find that Universal pretty shitty investment. There are issues also. I suspect the these polices are big money makers for the company’s and the sales people. If you look at the terms of the policy’s you will usually find that the cash value builds very slow at first. I think this is were the real money is. Little risk of you dieing, your still pretty young, and there is a likelihood that you are not going to continual with policy long term. Something will come up and you drop the policy. So with little cash value at the onset, there is a lot income at the front of the contract. The company shares this with the agent in the form a up front commission. I have never been able to get a firm answer on this but I think $1,200 for the sale of the average policy. With term life, the agent gets small percentage as you pay you premiums. Go figure why the agent is pushing on you. Some companies put a lot of pressure on their agents to push this kind of product. I worked with one profession in my community that quit the business because of this. Or was he forced out… I have never talked to a professional (other than an insurance sales person) that thought these policies are a good idea. There are just better investment products available. Additionally the decision to purchase life insurance is probably best made in the context of a complete financial/retirement plan. You are probably not going to get these other professional services from the insurance sales person. Just my opinion. ---
**Author:** ![Moonchild](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@Moonchild](https://boards.straightdope.com/u/Moonchild)\ **Post date:** [December 8, 2005, 10:06am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/27 "2005-12-08T10:06:19Z")
Everyone, thank you so much for your help. Even though I expected some top-notch information from dopers, watching the information pop up practically overwhelms me. It really was my wife who he needed the direction moreso than I and she is convinced, so we will look further, but not rush the process. Crazy thing is, the insurance guy really seemed sincere, really wanted to help, although he did seem the type to be a bit naive to the insurance process in some ways (I know, I know, I’M the one who’s being naive, right?). Regardless, the concrete advice from dopers really makes one feel secure in matters like this, where one can otherwise feel just completely lost. What an amazing resource SDMB is. ---
**Author:** ![Cemetery\_Savior](https://avatars.discourse-cdn.com/v4/letter/c/439d5e/32.png) [@Cemetery\_Savior](https://boards.straightdope.com/u/Cemetery_Savior)\ **Post date:** [December 8, 2005, 8:44pm UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/28 "2005-12-08T20:44:41Z")
> [@Moonchild](#): > > Crazy thing is, the insurance guy really seemed sincere, really wanted to help, although he did seem the type to be a bit naive to the insurance process in some ways (I know, I know, I’M the one who’s being naive, right?). Not really. When I was in the part of the business that was more interested in Life Insurance (I’m Medical now), they would hire people who were pro-life-insurance…and really looked for the proselytizing type. If spun the right way to a younger kid, Life insurance can seem like a great idea. That’s where you get a division in sales forces between people who “believe” in Life, and those that view it as an ancillary add-on. The way I think of Term vs. UL vs. WL is like this: [ul] [li]Term: Great, if you really WILL save and invest the difference in premiums. You get protection, and dont’ get too much premium tied up.[/li][li]Rebatable Term: Except for losses vs inflation over time, I don’t really see a downside. It acts like Term, there’s a forced savings component (in the premium), and you get a lump-sum disbursement in about 10-20 years. [/li][li]UL: Not horrible, but it’s best (IMHO) for peopel who won’t save the difference in Term premiums.[/li][li]Whole: Don’t get it. you get expensive coverage (face value), and an inferior (usually) investment component. Why bother? Buy term, invest the difference in the VFINX fund.[/li][/ul] My opinion only, of course. -Cem ---
**Author:** ![pmwgreen](https://avatars.discourse-cdn.com/v4/letter/p/edb3f5/32.png) [@pmwgreen](https://boards.straightdope.com/u/pmwgreen)\ **Post date:** [December 9, 2005, 1:10am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/29 "2005-12-09T01:10:27Z")
> [@Moonchild](#): > > Everyone, thank you so much for your help. Even though I expected some top-notch information from dopers, watching the information pop up practically overwhelms me. It really was my wife who he needed the direction moreso than I and she is convinced, so we will look further, but not rush the process. > > Crazy thing is, the insurance guy really seemed sincere, really wanted to help, although he did seem the type to be a bit naive to the insurance process in some ways (I know, I know, I’M the one who’s being naive, right?). Regardless, the concrete advice from dopers really makes one feel secure in matters like this, where one can otherwise feel just completely lost. What an amazing resource SDMB is. You’ve met the guy; we haven’t. If you say he’s sincere, I am sure he is. My only advice is “shop around.” You can get illustrations of all these policies and some might surprise you. The only problem is that it’s easier to get a good return on your money if you are provided to invest it in quantity, for a long period of time. Good luck! ---
**Author:** ![Joools](https://avatars.discourse-cdn.com/v4/letter/j/6de8d8/32.png) [@Joools](https://boards.straightdope.com/u/Joools)\ **Post date:** [December 9, 2005, 4:09am UTC](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495/30 "2005-12-09T04:09:59Z")
> [@Moonchild](#): > > The numbers in the OP are correct: > Age 39 female, non-tobacco user, TERM $33.07 per mo., $250K return on death; > UNIVERSAL LIFE $75.42 per mo., $100K return on death. Nobody’s pointed this out explicitly yet, but just to be sure you can follow who is advising what… this is actually the opposite of what you said in the OP: > [@Moonchild](#): > > The plans we are looking at are thus: > Term: 75 per mo., $100K return on death; > Uni Life: 53 per mo., $250K return on death. So the term insurance is a higher amount of coverage, for a lower monthly cost, which is what one would expect. [Previous page](https://boards.straightdope.com/t/term-life-insurance-plan-vs-universal-life-plan/334495.md?page=1)