Universal Life Insurance

Universal life insurance is a kind of permanent life insurance, similar to whole life insurance, but with one big difference: flexible premiums.

With a universal life insurance policy, premiums can be paid when an insured person is able, so long as there is sufficient cash present to pay for the cost of the insurance. Whole life insurance does not allow a person to change premiums based on their current economic situation.

Universal Life Insurance Premium

Like all life insurance policies, the main purpose of universal life insurance coverage is to protect an insured’s dependent family members in the event of their death. Life insurance policies give specified beneficiaries a death benefit that can be used to pay for funeral expenses, and can help families as they adjust their lives financially after their loved one’s death.

With a universal life insurance policy, there are two options for how beneficiaries can use a death benefit. There is a level death benefit option, which offers one amount that stays steady throughout the life of the policyholder, no matter the cash value. Or, there is a death benefit plus cash value option, which gives the cash value to a beneficiary, in addition to the initial death benefit. This second option involves a cash accumulation portion, which means that as premiums are paid, a portion of that money is allocated by an insurance company into an interest crediting strategy.

One interest strategy that is commonly used is equity indexed universal life, which allows a policyholder to participate in the gains of a major stock index. A specific rate of return is guaranteed no matter how the market fluctuates. If the market performs better than the guaranteed rate, a policyholder gets a percentage of the gains for the index. Universal life insurance policies offer some flexibility.

Life is full of twists and turns that can affect a person’s financial standing. Maybe they were laid off from work for a period of time, or had a medical condition that caused them to miss time on the job. Maybe they decided to go back to school and are not working as much, or are having another child and need to adjust their finances. Financial circumstances fluctuate in life, and with a universal life insurance policy, an insured can opt to pay a lower premium when the market is performing poorly, and up the premium when the market is thriving.

The cash value build up is nice, but what makes it even nicer is that a policyholder can borrow or withdraw from it when financial circumstances require. Borrowed money does need to be paid back, although an insurance company may charge interest, which is important for an insured to understand. With a universal life insurance policy, an insured has options in terms of investment strategies, and otherwise. There are many benefits to universal life insurance coverage. If a death benefit with the addition of the accumulated cash value is important to an insured, then universal life insurance may be a good option.

A local independent life insurance agent will be able to answer questions and provide advice about selecting the appropriate policy. Universal Life insurance is NOT for everyone. There are risks involved that should be very carefully explained and considered. This is why it is important to talk to a local independent life insurance agent to discuss the options that exist, and see what may work for a particular person.

Variable Universal Life

Variable Universal Life is a variation of Universal Life. A variable universal life insurance policy offers a flexible premium, which can be adjusted as needed. There may be times in your life when you are able to pay a higher premium, but there also may be times when you need to use that extra money elsewhere and have to lower your premium costs. When a policyholder chooses to adjust their premium, it can cause a change in the coverage amount.  This is one of the reasons why this kind of coverage is known as “variable” universal life insurance. Payments are left to the responsibility of a policyholder, and as long as he or she maintains a minimum amount to pay for the costs involved with a policy, the insurance coverage remains in effect.

This insurance is also known as “variable” because, with a variable universal life insurance policy, a policyholder can decide to invest money into multiple accounts, which have a potential to increase in value over time.  This offers the beneficiaries named in a policy the potential for a greater payout than can be provided through a fixed life insurance policy. These investments are made into the stocks and bonds markets, so it is important for policyholders to understand the risks involved, but with investments that do well, dependents can see a cash build-up on top of the death benefit under a policy.

Variable universal life insurance is a permanent life insurance option, meaning that the death benefit will be paid when an insured dies as long as there is sufficient cash value to pay the costs of the insurance policy. For many life insurance policies, there is a specified age at which the cash value equals the death benefit amount. This means that when a policyholder reaches this age, the death benefit is given, even if the person is still alive. With a variable universal life insurance policy, this does not happen.  Instead, the death benefit and the cash built up through any investments are given to the beneficiaries at the time of the insured’s death, and not before.

The different options for investments vary between variable universal life insurance policies, making it important for people interested in learning about this insurance option to contact their local independent life insurance agent. With an independent agent’s help, they can find a policy that allows them to choose how they want to invest their money. Today’s variable life insurance policies provide a wide variety of sub accounts for policyholders, and some polices offer 50 or more separate accounts covering a wide range of asset classes and management styles.  An independent life insurance agent can explain these and other factors to consider in selecting a policy.

There are many things to think about in buying a life insurance policy. The cost of insurance is based on term rates and the age of an insured, and the risk of death increases with age, which can then increase the cost of insurance coverage. Variable universal life insurance is complex and, like other kinds of life insurance, can change over time. It is important to discuss funding and investing when considering variable universal life insurance. An independent insurance agent understands these and other issues that should be evaluated when buying a variable universal life insurance policy.

Variable universal life should only be purchased by the sophisticated buyer.

Other Enhanced Insurance articles related to Forms of Life Insurance:

Cash Value Life Insurance

Group Life vs. Individual Insurance

Mortgage Life Insurance

No-exam Life Insurance

Permanent Life Insurance

Term Life Insurance

Variable Life Insurance

Variable Universal Life Insurance

Whole Life Insurance

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

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