Term vs. Universal Life Insurance

When it comes to term life versus universal life insurance, they are standard life insurance policies but carry different rules. Life insurance rates for term life is $14 per month on average, but universal life insurance has an average cost of $58 per month. Life insurance for term life is much cheaper, but you receive more benefits under universal life insurance. Compare multiple companies and shop around to find the best rates.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Dec 15, 2020

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Quick Facts

  • Term life insurance only lasts for a select number of years.
  • Universal life insurance is a type of permanent life insurance that allows the policyholder to create life insurance savings.
  • Permanent life insurance types are more expensive than term life insurance.

Term life and universal life insurance are two options you can take when shopping for a life insurance policy. However, there’s a disparity between term life insurance quotes and universal life insurance rates.

Also, term life and universal life insurance work differently. In this guide, you’ll learn the advantages and disadvantages of universal life insurance and term life insurance.

If you want to compare multiple companies, enter your ZIP code to find cheap term life and universal life insurance in your local area.

What’s the difference between term life vs. universal life insurance?

Term life insurance lasts for a period of time, while universal life insurance can last for your entire life. But how does that work? Universal life insurance is permanent life insurance that pays for a life insurance coverage amount and retirement savings.

There’s a level of flexibility, which allows you to use the accumulated cash as you see fit. However, you won’t be able to make investments with a universal life insurance policy. To do that, you’ll need a variable universal life insurance policy.

What about term life insurance? Continue reading to learn more about term life and universal life insurance.

Term Life Insurance

How does term life insurance work? When you’re looking for a term life insurance policy, you’ll have several options. Those options are terms which have different lengths in years. Examine the table to see how terms affect term life insurance rates.

Average Monthly 10-Year & 20-Year Term Life Insurance Rates w/ a $250,000 Coverage Amount
Age and Gender$250,000 Policy Average Monthly 10-Year Term Life Insurance Rates$250,000 Policy Average Monthly 20-Year Term Life Insurance Rates
20-Year-Old Male$13$17
20-Year-Old Female$11$14
25-Year-Old Male$13$17
25-Year-Old Female$11$14
30-Year-Old Male$13$17
30-Year-Old Female$11$14
35-Year-Old Male$13$19
35-Year-Old Female$12$17
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The higher the term, the more you’ll pay for term life insurance. People who ask for higher than terms get higher coverage amounts.

The advantage to term life insurance is the low cost. However, when the term expires, you will lose the value of the life insurance policy.

To secure some payoff, ask your life insurance provider to add the return of premium life insurance to get a portion of all the premiums you’ve paid when the policy was active.

Universal Life Insurance

The great thing about universal life insurance is that it pays for your life insurance and places the rest of your monthly payment into savings. Let’s look at the average cost of universal life insurance by age in the research below.

Average Monthly Universal Life Insurance Rates by Age
Policyholder AgeAverage Monthly Universal Life Insurance Rates
20-Year-Old Policyholder$36
30-Year-Old Policyholder$42
40-Year-Old Policyholder$63
50-Year-Old Policyholder$90
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Why is universal life insurance more expensive than term life? Universal life insurance can last your entire life—it’s a type of permanent life insurance.

A small portion of your monthly payment goes toward life insurance’s death benefit, while the other part of your premium goes toward savings. But universal life insurance payments are more flexible.

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What is whole life insurance?

Whole life insurance is an insurance policy that rivals some retirement programs. You can even move your whole life insurance cash value to another company if you need to.

According to the Internal Revenue Service (IRS), retirement savings cannot move into life insurance accounts.

How much does whole life insurance cost? Let’s review whole life insurance costs.

Average Monthly Whole Life Insurance Rates by Age
AgeAverage Monthly Whole Life Insurance Rates (Payable Until 65)Average Monthly Whole Life Insurance Rates (Payable Until 99)Average Monthly Whole Life Insurance Rates (Payable Until 121)
20-Year-Old Policyholder$85$73$58
30-Year-Old Policyholder$122$99$82
40-Year-Old Policyholder$196$145$123
50-Year-Old PolicyholderN/A$224$180
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As the age tier increases, the cost of life insurance decreases. This happens because life insurance companies want you to keep your policy as long as you can. The more business you promise them, the less they’ll charge.

Whole Life vs. Universal Life Insurance

Whole life insurance works similar to universal life insurance, but the payments are more consistent and fixed. The cash value carries a better guarantee than universal life insurance.

Universal life insurance, on the other hand, provides more flexibility regarding life insurance rates. Also, you can’t make investments like whole life insurance policies.

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When should you hire a professional?

If you want to maximize the potential of a term life, universal life, or whole life policy, talk with a finance professional. If you happen to be in college, speak to a professor who knows how to transform life insurance policies into wealth.

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Term Life and Universal Life Insurance: The Bottom Line

For cheaper life insurance rates, go with term life insurance. However, universal life insurance and whole life insurance come with more rewards over time. They cost more than term life insurance, but they can provide wealth if you hang on to them.

Find affordable term life and universal life insurance from companies in your area by entering your ZIP code in the FREE online quote tool below.

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