This type of life insurance is decreasing term insurance and is offered when a person buys on credit or takes out a loan, such as a mortgage. The intent of the policy is to pay off the loan, plus interest, if the policyholder dies. Credit life tends to be over-priced compared with conventional life insurance products. A well-planned, overall life insurance program should cover present as well as foreseeable debts. If you need more life insurance to cover a debt, you should compare the cost of decreasing term policies before purchasing a credit life insurance policy from a lender.
Universal life combines term insurance with tax sheltered annuities.
The return on the annuity is tied to short-term money market instruments and changes periodically. Flexibility, one of the key characteristics of universal life, exists in both premiums and death benefits. The premiums are specified at the beginning of the policy. However, the policyholder has a great deal of premium flexibility during the policy lifetime. The premium payment in a particular year may be reduced to any level.