Other Types of Life Insurance
A consumer needing flexibility in premiums in the early years of the policy (typically, younger people have less money), then universal life may be considered. Initiated in the 1970s, universal life insurance came about when insurance-industry regulations changed. The idea was to help insurance companies be more competitive with other types of financial services companies.
More flexible than whole life traditional policies, universal life insurance has premiums that can vary from year to year. Occassionally, premium payments can be delayed or even skipped. Universal life has higher premiums and lower guaranteed cash values and death benefits. Universal life policies earn interest instead of dividends.
Knowledgeable investors who can tolerate some risk should investigate variable life. Variable life insurance includes limited guarantees which translates into better potential for cash-value increases.
Variable life has required guaranteed annual premiums with a guaranteed minimum death benefit. But, with no guaranteed cash value, the buyer is able to select the investments for their policy. These investments may include mutual fund accounts, from low risk money market to high risk growth funds.
Life Insurance = Insurance, Not Investment
Life insurance should not be bought for the sole purpose of an investment. The cost of the premiums pay for the death-benefit coverage and other expenses, like sales commissions. For example, a life insurance policy was not designed as a method to save for college. However, parents should be sure they have all of their expenses protected by life insurance to eliminate hardships on their children in the event of their demise.
Another important tip is to not buy the fancy riders except maybe the waiver of premium. This can take care of premium payments, keeping the policy active, in the event of disabling injury.
A way to have life coverage in the case of limited finances is to have a a combination term and permanent life policy.