UL vs Term

There are many people in Hong Kong and China, who still do not understand what the difference between a Universal Life insurance plan and a Term insurance plan is. This is a result of the big difference between the premiums payable for both plans. For example a customer who is aged 50, his premium for US$1 million coverage will cost a one-time premium of US$300,000.  The same amount in a term plan will cost US$10,500 each year. Meaning that the customer will continue paying the premium till he reaches the age of 99 years when the coverage ends. That means that the customer will pay US$10,500 multiplied by 49 years, which will bring the total premium paid to US$514,500 as compared to the one-time payment of US$300,000 for a  Universal Life plan.

Here are the main differences between the two:


Universal Life Term Plan
Premium Outlay Single Premium Paid Yearly till coverage ceases
Cash Value Yes No
Guaranteed Interest From 2% NA
Maximum Coverage Term Lifetime Till Age 99
Premium Financing Yes No


The figures here are estimations and they are not representing figures from any company.

Summing up, it all depends on the customer’s financial situation and age to determine which financial plan is more appropriate. The total sum of the premiums outlined will be higher for term plans in most cases. Many high net worth customers usually go for Universal Life plans since it does not have a duration limit. It also allows them to recover some of the capital amount paid over the years and use it for retirement.