During its specified time-period of coverage, such as 10 to 30 years of level premiums and level benefits, Term insurance will be cheaper than Universal Life or Whole Life. If the Policy Owner buys Term instead of Universal or Whole Life, the premium saving could be deposited or invested outside of the policy. When followed, this principle provides more cash while the Insured is alive, and more benefit after death. That is because the outside savings are separate from the policy. A $100,000 Universal Life policy with $20,000 of cash surrender value would result in a death benefit of $100,000. A $100,000 Term policy with a bank savings account of $20,000 would leave the beneficiary $120,000.
Insurance agents who favor Term Life Insurance have often described Universal and Whole Life as “Funny Banks,” because cash surrender value is not paid out in addition to the death benefit. Universal Life policies with an “Increasing Benefit Option” are constructed to sell more life insurance every year equal to the cash value, and the price of this goes up with the Insured’s birthdays.