Universal Life Insurance
Universal life insurance is a type of life insurance policy that involves flexible premiums and adjustable benefits, all while accruing cash value. It is a type of permanent life insurance which differs from the more common term life insurance polices, however, term life is the most common of all, and universal life is the most common form of full coverage. Universal life insurance can be described as “a mix between term insurance and a savings fund,” according to Fred Waddell of Auburn University. Should your insurance needs change throughout the course of your policy ownership, a universal life insurance policy provides you with the ability to change the value of your insurance and, of course, the insurance includes a guaranteed death benefit for your family members.
The benefits of universal life insurance are many and differ very much from term life. Universal life provides for extra flexibility, as mentioned earlier. Because of this, you are able to choose exactly how much insurance you need and want, and you can adjust this amount as your needs and the needs of your beneficiaries change.
You will generally have two options when it comes to universal life insurance. You can opt to keep death benefits the same annually,-the only option for term life insurance- or you can keep the death benefit equivalent to the original value of the policy plus the additional cash value accumulated since the policy was purchased.
As with most other types of life insurance policies, the universal life plan provides your family with financial security in the event of your death, and these benefits are usually awarded tax-free. Also, the account value of your policy is calculated using the company's current federal income tax-deferred interest rate, which is currently about 5%.
With a universal life insurance policy, however, you are in charge of how much you pay toward insurance and savings. You also have the option of changing the value of the policy, and how often you make payments. It is vitally important to make sure that your savings are substantial enough to take care of your monthly payments for the insurance and any expenses regarding your policy. If your savings cannot cover these payments, the cash value accrued in your policy will be thrown away on these monthly expenses and eventually your policy will lose its value. This is unlike term life insurance. With term life, what you pat for is what you get.
Keep in mind that inflation will cause universal life policies to have a high interest rate, but the insurance company may guarantee a lower rate. Because of this, universal life insurance premiums are lower than whole life insurance premiums. Interest rate fluctuation will affect your payments and your rewards. In addition, remember that charges for policy management can also affect what kind of return you will get on your investment.
So, what are the best things about universal life insurance? Basically, universal life insurance is just like whole life insurance, but with more flexibility and the added benefit of having an investment attached. The flexibility in premiums make universal life insurance a practical option for younger people who want protection but find that their financial capabilities tend to fluctuate, and for people who have other policies that can help augment their universal policy.
Of course, there are some downsides to universal life. If you or the insurance company doesn't do well with investments, your cash return will decrease. If this happens, less money will be available for the death benefit. When getting life insurance online, both quotes and coverage be sure to do side by side comparisons in order to get the best price.
When shopping for a universal life insurance policy, consult a qualified agent and have him or her assist you in finding the perfect company and policy for you. Remember that premiums, rates, and even coverage vary widely from company to company and state to state. Make sure that you have found the optimal tax benefits and cash value capabilities.
As a basic protection plan, universal life insurance is an excellent option for those who want to have as much say as possible in the payment and management of their policy.
