Pitfalls of Universal Life Insurance
You’ve probably been asked by your life insurance agent to buy ‘permanent’ insurance such as Whole Life, Universal Life or Variable Universal Life. Their reasons sound quite compelling and you feel that it may be in your best interests to take such insurance. However, there are quite a few things your insurance agent may not be telling you. There are two broad categories of life insurance—term and permanent. The basic idea behind life insurance is that if you die prematurely, there will be a pot of money there to take care of your loved ones. That pot of money is known as the ‘death benefit’.
On the surface, it may seem that there shouldn’t be a lot of difference between the premium on 20-year term and a universal policy with the same death benefit. But reality is quite different. Seniorjournal.com reports:
What your insurance agent isn’t going to tell you is that the commission on permanent insurance can be around 70% of the first year premium and then maybe 5% a year on additional premiums. Commissions on first year term premiums can be as high as 100%. In our example above, the agent will make about $5600 on permanent versus only $1400 on the term. This higher commission is a tremendous incentive for agents to sell permanent insurance instead of term.
Read more: Beware of Universal Life Insurance: Part 1
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