Term vs. Universal Life Insurance - bestinsuranceonline.ca
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Life insurance comes in many different forms. If you can distinguish the different types of insurance, you will be more confident in choosing the right product to protect yourself and your family against unexpected events in life.
In this article, Best Insurance Online will provide readers with an overview of Term Life Insurance and Universal Life Insurance and compare these two products based on their outstanding policy features and how they cost.

What is Term Life Insurance?

A Term Life Insurance policy is an agreement between an insurance company and a policyholder in which the insurer promises to proceed with the insurance payout to the designated beneficiary when the insured dies within the period specified in the insurance contract.
When it comes to Term Life Insurance, please kindly remember that only pure death benefit should be expected, neither accumulation value nor investment benefit will be involved! Notice the time mentioned in the contract too. It will be the maturity date of your current term life insurance policy, which means that you who outlive the insurance term will not be protected by this term life policy anymore after the maturity day.
When it comes to cost, the premium from Term Life Insurance is expected to be the lowest compared to permanent life insurance packages where you get protected by the insurance company for the whole life.
The Contract term of this policy is typically 10, 15 or 20 years and the premium payment term is usually equal to the Contract term.

What is Universal Life Insurance?

Universal Life Insurance is based on term life insurance but has an additional cash value. In other words, Universal life insurance is the combination of the pure insurance features of term life with the savings account elements of whole life insurance.
Unlike Term Life Insurance, a part of the Universal Life Insurance premium goes to the cash account in the policy. This cash account accrues interest and is tax-deferred. It is flexible and has the advantage of increasing or decreasing future insurance or stopping premiums if there is significant cash accumulation.
If the insured can’t afford a policy that offers high coverage, they can start with lower coverage and buy more coverage by increasing their premium. They can choose to pay up the policy in 10, 15, 20 years or for a lifetime, and in any case, they are covered up to age 100.

Term vs. Universal Life Insurance: Policy features

Policy featuresTerm life insuranceUniversal life insurance
Choice of policy lengthYesNo
Provides lifelong coverageNoYes
Premium is flexibleNoYes
Low premiumYesNo
Guaranteed life insurance payout amountYesYes
Cash value accumulationNoYes
Possibility in cash value declineN/AYes
Death benefits are flexibleNoYes
Might be eligible for annual dividendsNoNo

Term vs. Universal Life Insurance: Cost comparison

The table below compares the average annual cost between whole life insurance and term life insurance for a $500,000 policy. The most common term length, 20 years, is used because there is no way to compare term life to whole life on an apples-to-apples basis.

Person coveredUniversal life T100 – Minimum Premium20-year term life
Male, age 30$2,788$288
Female, 30$2,411$214
Male, age 40$4,411$440
Female, 40$3,839$316
Male, age 50$7,043$1,200
Female, 50$6,022$844
Annual premiums using an average of three lowest prices Best Insurance CA can find in each category for preferred health rating and non-smoker men and women. The data was taken on 04 March 2021

Term vs. Universal Life Insurance: Which to choose?

Choose Term Life insurance if:

  • You are looking for a type of insurance that matches with your current tight budget. Term Life insurance is affordable for everybody. 
  • It would help if you had protection against the risk of death. In the bad case that you or the insured may pass away, the insurance company would pay a sum of money to the designated beneficiaries. 
  • You are finding a way to support your beloved members such as your parents, spouse, or undergraduate children to have a temporary fund to afford their lives in case you die.

Choose Universal Life Insurance if:

  • You are looking for the type of insurance which prioritizes lifetime protection.
  • You want the option that you are flexible in deciding how much premium you want to pay for specific periods. The frequency of your payments can also be changed! Excluding the first few years (2 – 5 years), you can pay more premiums than required if your financial situation is good and vice versa, pay less premiums or even skip payments if your budget is tight.
  • You are looking for the option that you can change your death benefit, which means increase or decrease death benefits over time.
  • You want to earn interest besides pure protection purposes. Higher returns can be yielded when you know how to take advantage of the cash value growth.

Key takeaways

Term Life Insurance only covers you within the period agreed in the insurance contract, while Universal Life Insurance can cover you for the entire life. 

Term Life Insurance is affordable because of its temporariness and no cash value involved. Simultaneously, the premiums of the Universal Life Insurance policy are much higher because it is protective for a long term plus its investment characteristic.


Term Life Insurance and Universal Life Insurance are just two out of many popular insurance products nowadays in Canada.

Letting a one-product agent showcase a single product can lead you to choose the wrong product for your needs.

The decision to join a life insurance product already shows that you are responsible for yourself and your family. But do a little more by spending time reading this article and contacting a professional agent like Insurance Direct Canada to help you get the right insurance policy that you will be satisfied with.

Frequently Asked Questions

When my Term Life Insurance policy expires, should I extend the Term Insurance contract or switch to Universal Life Insurance?

Any participant often has 04 choices when his Term Life Insurance contract expires, they are:
1. Extend the current Term Insurance policy
2. Switch to a permanent Life Insurance policy such as a Universal Life Insurance policy by using the conversion policy (if available)
3. Apply for a new Insurance policy
4. Not doing anything
You must undergo a new underwriting for the 3rd option; While for the 1st and 2nd options, you do not need to, so it is best when you do not have a good health status at that time. Applying for a new insurance policy is costly when your health is not good enough.
However, it would help if you talked to your insurance company agent BEFORE the Term life policy expires for the extension or conversion option. We cannot guarantee that you can do these actions after the policy expires. And please kindly note that the premium will change according to your age when extending the current Term Insurance policy. The same with converting to Universal Life Insurance and the premium of permanent life insurance is much higher due to its additional benefits.

Can I change my mind and switch from a Term Life Insurance policy to a Universal Life Insurance policy while my current contract has not expired yet?

Though most Term Life Insurance policies are convertible, it is recommended that you check with your insurance company or insurance agent for detailed information. You need to check with them what options you have when you want to convert your current term life insurance policy into another one and when you can do it. With a Term Life Insurance policy, you will have the power to convert to another permanent life insurance policy; it can be a Universal Life, but it can be Whole Life only; it also can be both options for you. And you can not make the conversion decision anytime you want; some will let you process the conversion at a specific age maximum, etc. They all depend on the rule or policy of a particular insurer. Every insurance company has different policies for its participants. Therefore, it is advised to check this information before signing in the Term Life Contract.

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