What is the difference between "universal life" and "whole life" and "paid up98" life insurance policies

Public Comments

1. I am asuming that those are different names for different plans. Usually the name tells you about the policy. Whole LIfe means that the policy will become paid up at age 98. That is on the policy aniversary after the insured reaches 98 years old. Whole Life means that the policy will have to be paid until the insured passes away. The two previous plans have fixed benefits and fixed payments. Universal life is more complicated. Universal life policies have a variable premium and variable benefits. This is the way it works: -Your agent/broker will give you a range of payments from minimum to maximum. Let's say that your minimum is $30.00 your maximum is $120.00 and your midpoint payment is $65.00 for an insurance of 50000 -You select your payment. Let's say you select $40.00 -Every time you make a payment, that money will go to an account that pays an interest to make it grow. Every month, your insurance company wil withdraw the cost of insuring you for 50000 from that account. The balance will grow with interest. --> Here is the tricky part: Every year that goes by, you become older. Therefore the cost of insuring you goes up. On the first years is not a big difference, but after 10 or 20 years it will add up. So every year the company will withdraw a bigger amount of money from that account to keep you insured. Remember that the balance will grow with the interest, so the more you pay on the earlier years, the less you will have to pay in the later years. In some cases -if you funded well early- the insurance company will ask you to stop payments temporarily; the opposite is also true, if you funded very lightly, the insurance company will ask you -at some time- to raise your payments or you will lose the policy. Universal Life policy is really good, but to get the best benefits I would recommend funding it at least with the mid-point premium. Also have your agent/broker explain you what is the interest rate (it varies from company to company), what interest rate they guarantee and what do they have current (be careful! some rates are not guaranteed in this policy and if they change they might affect you in a negative way).
2. OK, this is a TYPICAL answer, but forms are NOT standard, so you will have to read the policy over to be SURE, or discuss it with your agent. With Whole Life, you have an annual premium that you pay, your whole life. As long as you pay THAT PREMIUM, the policy will stay in force until you die. The premium will STAY THE SAME no matter how old you get. (of course, there are certain conditions when the premium can be raised). With Universal life, it's like whole life, but part of the money is invested in a mutual fund type product, so the cash value portion of the policy earns interest. It's SMALL interest. Theoretically, if the interest is enough, it will pay your premiums for you. Unfortunately, it DOES happen that one year your interest is enough, but years later, it stops being enough, and you have to go back paying the premium, or part of it. Just like whole life, the premium is set up in advance, and except under unusual circumstances, it won't go up, and the policy doesn't "expire". Paid Up insurance is when you pay a large lump sum, up front, once. (it can also mean like a universal policy, where there's enough interest/income to pay the premiums, and be subject to change from year to year). ALL of these products costs considerably MORE than term insurance - which expires after a certain period, and is "pure" insurance with no "investment" gimicky stuff added.
3. Are you looking for generic answers about definitions or are you looking for more specific guidance? Maybe if we knew the company and policy series you were referring to or if we knew what your goals are we could be more helpful.
4. univeral life is life insurance combined with investment. i.e. some of your premium goes to buy life insurance and some is invested. This is very expensive but pays a good commission to your agent. Whole life insurance - you pay a level premium (same amount each year) for life. Since you pay more than you need to early your whole life policy builds up "cash or surrender value". That is an amount you can cash in if you decide to terminate the policy or you could take a loan out for that amount (the amount of loan reduces the death benefit until it is paid back). Paid up 98 is also whole life except it means you pay the level premium until age 98. Not much of a relief. There is also paid up for different ages. Most people would like to stop paying life insurance premiums when they retire so they choose paid up at 65. (The premiums will be higher the lower the paid up age is.) I think a small amount of whole life 65 to cover burial expenses makes sense. For the rest of the insurance needs I would suggest guaranteed renewable term - for the length of time you need insurance e.g. until you children reach a certain age.