Universal Life Insurance Cost
- Universal Life Insurance Rates – Universal Life Insurance plans charge premiums based on age, gender, and health conditions, and the actual rates usually fall between those for term and whole life coverage. The younger and healthier you are when you purchase the policy, the lower the rate. These factors are used to compare an individual against mortality and morbidity table statistics. For example, mortality table data projects the longevity of individuals at different age levels, and morbidity table statistics are used to determine the numbers of individuals exposed to the risk of illness, sickness, and disease at each age, and then the data is used to compare the actual number of individuals who historically have died or incurred illness, sickness, or disease at each age. This provides a level of certainty that the actuary can have in predicting the longevity of an individual so as to reduce the risk of early payout of a death benefit by an insurance company.
- Universal Life Insurance Quote – A Universal
Life Insurance quote is an offer by an insurance carrier for a
prospective policyholder to consider purchasing an insurance
product based on certain criteria both assumed and known about the
prospective policyholder. It is not an actual contract unless all
terms and conditions defined in the quote are fulfilled by each
party to the policy.
The parties involved in a Universal Life Insurance policy include the insurer, the insured, and the beneficiary. The beneficiary may be one or multiple persons sharing the death benefit equally or in varied amounts, depending on the desires of the insured.
The quote might offer a certain premium level based on the assumption of certain aspects about an individual and, until confirmed, it is not considered a contract. For example, the application might ask an individual if he or she smokes, and until the completion of tests that are required to confirm the answer, the policy is not yet a contract. Further, the quote may define a required waiting period before coverage is in force, in order to lessen the possibility of individuals fraudulently collecting benefits. This requirement helps minimize the premium consumers pay by combating fraud and misrepresentation.
Depending on the requirements of the specific policy and issuing insurance company, your agent will ask for specific personal information as needed. Only approved insurance professionals licensed by the state are allowed to offer insurance products for sale. These individuals have a responsibility to protect your personal information and can be held both personally and criminally liable for acting in an unlawful manner by not protecting your personal information. The federal Health Insurance Portability and Accountability Act (HIPAA) sets a national standard for privacy of health information and is intended to protect consumers by requiring insurance professionals to maintain your private information in confidence. The insurance professional will require certain private information, including your age, gender, and health condition, so as to submit your information for review by an underwriter. Additional requirements might include an examination and blood test by a medical professional to confirm the information submitted on the insurance application.
Once the required personal information is confirmed, the defined waiting period has lapsed, and all other terms or requirements set forth in the policy have been fulfilled, then the coverage is determined to be in force, and a valid contract for Universal Life Insurance coverage between the insurer and the insured or policyholder is in place.
- Universal Life Insurance Companies – There
are literally thousands of different companies that sell Universal
Life Insurance, but which ones are the best? Most consumers look
for size, reliability, strong customer service, and longevity in
business as the criteria, whereas others just look at price. Every
state independently regulates insurance companies, and there are
both admitted and non-admitted life insurance carriers. The benefit
to the consumer if an admitted carrier becomes insolvent and goes
bankrupt is that the state has a guaranty fund available to help
pay consumer claims. Policies written by non-admitted carriers do
not have this protection, so generally their rates are
significantly less reflective of the additional risk of working
with them. Consumers can check with their state insurance
department for an admitted carrier list.
Another difference related to insurance carriers includes their ownership. There are private commercial insurers, including publicly-traded, independently-owned, and mutual cooperatives in business to make a profit. Then there are private noncommercial insurers that include nonprofit groups, with the proceeds from sales going back to the subscribers or reinvested into the group to expand benefits or coverage. The final group of insurers consists of public insurers that are federal governments offering coverage to federal employees and the military.
Further, insurance carriers market their insurance products differently. Some carriers are considered direct marketers, others use only independent agents, and still others use a hybrid approach of both direct marketing and independent agents. Many consumers believe that the benefit of using an independent agent is working with someone local you can trust and who has relationships and is active in the community.
However, many direct marketers have greatly expanded and opened offices nationwide to provide the same local feel an independent agent offers. And with the expansion of the Internet, many other carriers have moved away from the costs of opening many local offices and paying commissions and simply market on the Web to provide the lowest price possible to consumers.
The final criterion when looking at insurance carriers is their financial stability. Purchasing a Universal Life Insurance policy is a long-term commitment, and you want to be certain that the carrier is around to pay the claim. There are carrier rating services that offer their opinion of the strengths and weaknesses of the various carriers. These services are offered by the following:
DirectoryUniversal Life Insurance Directory
The premium cost associated with a Universal Life Insurance policy is directly associated with the level of risk the carrier is taking, risk that can be managed best by selling to younger, healthier individuals. For example, a 28-year-old male has a life expectancy of 49 years, versus a 28-year-old female with a life expectancy of 53 years. Unfortunately for insurance carriers, younger, healthier individuals rarely think of the need to purchase life insurance, so the pool of individuals who purchase life insurance is somewhat tilted toward those who feel they need it. As such, the pool generally consists of people who range in age from their late twenties to late sixties, with a few exceptions here and there. These individuals usually have a spouse, children, and a home they feel they need to protect and look at life insurance as providing the necessary protection.
As with any insurance product, if all individuals from ages 18 to 85 purchased insurance, the pool would be much greater and the risk would be more widely spread, reducing the overall cost of premiums to any one individual. However, the cost can be minimized by not waiting too long to evaluate and prepare for your financial future. Further, a wise consumer needs to read the fine print prior to purchasing any product and determine what charges, riders, guarantees, and limitations affect the performance and price of the policy and compare it to other carriers’ offerings.