Universal Life Insurance: Description of Universal Life Insurance

It is time for you to find a life insurance policy that suits your needs.

Universal life insurance has many benefits, including:

  • Being the most affordable and most effective life insurance. It can provide the savings you need for your big expenses, such as your child’s education or your retirement.
  • The flexibility to increase or decrease your benefits and premiums at any time without penalty. As your life changes, so can your universal life insurance policy.
  • Having a cash value, which is the money you put into the policy plus the interest it earns. Your policy can act as a tax-shelter savings account. You can put in as much as you want and it has a number of interest-earning options.
  • The ability to protect your beneficiary from exorbitant federal estate taxes. Instead of liquidating assets, your loved ones can use the death benefit, cash value and interest to pay the taxes.

There are three options from which you can choose to increase the cash value of your universal life insurance policy. What you choose depends greatly on how involved in your investment you want to be and how much risk you are willing to take.

If you choose a standard universal life insurance policy, it will have a fixed rate of interest and you can just let your money sit and earn interest.

If you choose a variable universal life insurance policy, you can invest a large portion of your premium payments in stocks, mutual funds, bonds, and so on. If you like to play the stock market, then this is the policy for you. The cash value of your premiums will increase, and decrease, with the fluctuation of your investments.

Universal Life Insurance: Description of Universal Life Insurance

Equity indexed universal life insurance gives you a higher interest rate than a standard universal life insurance policy because you can invest in a stock market index. Your cash value will increase as the market index increases and you are guaranteed a minimum interest rate.

Other universal life insurance advantages include:

  • The build-up of cash value in a tax-deferred savings vehicle.
  • Other tax benefits, such as your beneficiary not having to pay tax on the policy’s death benefits.
  • The ability to borrow from the cash value for education, retirement or any other financial need that may arise.

Universal life insurance has many benefits that will financially protect and support you and your family for years.

Universal Life Insurance: When Can Universal Life Insurance Be Paid?

You can pay your universal life insurance in one huge sum. However, you must watch carefully and make sure your cash value is not depleted, making you accidentally default on your policy.

The payment schedule flexibility of a universal life insurance policy is a double-edged sword. On one hand, you can depend on your policy’s cash value to pay the monthly premiums. On the other hand, you need to watch the fluctuations of your investments, as well as any fees your insurer deducts. If your cash value can no longer pay your premiums, you have defaulted and your policy will be terminated.

There is a no-lapse guarantee, for a fee, that will give you a certain time period to catch up on your premiums if you unwittingly allow the cash value to be depleted. However, this guarantee has a number of stipulations, which vary between insurance companies, making it possible to default on your policy even with the guarantee. These stipulations can include losing your guarantee if you can no longer make your premium payments because you made a withdrawal from your cash value.

It is very important to remain aware of your premium payment schedule. In order to keep all involved parties informed, submit an annual payment schedule to your insurance company, and request annual payment expectations from your insurer.

The least risky universal life insurance is the standard policy with a fixed premium. You and your insurance company can accurately estimate how much each month is going to cost over a predetermined amount of time. In this instance, you can pay for your policy in one lump sum then ignore it. If you completely forget about it, your policy will still be in effect because of the no-lapse guarantee; however, your policy will become a flexible premium policy. In this case, your minimum premium requirement may now be much higher than what you were paying when it was a fixed premium policy. At this point, you have three choices:

  1. You can let the policy expire.
  2. You can pay the higher premium to keep the policy going.
  3. You can reduce the death benefits in order bring the premium rate back down.
Universal Life Insurance: When Can Universal Life Insurance Be Paid?

Being able to choose when you will pay your universal life insurance does not mean it requires less attention. In fact, it means you need to give your policy more attention.

Universal Life Insurance: Rates For Universal Life Insurance?

Universal life insurance is the most affordable of all whole life insurance policies; however, it also requires more planning and more attention. The rates for universal life insurance are calculated by the insurance company’s assessment of your mortality risk, how much coverage you want, and how much you want to pay.

Your insurance company will determine its risk in your mortality by performing a medical exam. You will be asked questions such as:

  • How recently you have been under a doctor’s care outside of routine or voluntary visits?
  • What ongoing treatments are you receiving?
  • Are you a smoker?
  • Do you currently suffer from the effects of HIV/AIDS, heart attack, stroke, diabetes, high blood pressure, depression, cancer, asthma or any other serious health problem?
  • What is your age, gender and height/weight ratio?
  • Are you involved in risky activities, such as racing or mountain climbing?
  • Do you have a risky job, such as a pilot or logger?

How much coverage you want and how much you can afford are the two most important factors in deciding what benefits to include in your policy. Universal life insurance benefits you most when you buy the policy with the intention of keeping it for many years. This is because your policy’s earnings will be largely based on accumulation over time. Determine your current and your future budget in order to estimate how much coverage you can afford. Also, keep in mind that with variable universal life insurance you can make coverage changes at any time over the lifetime of your policy.

There are two basic forms of indemnities available to you.

  1. Your insurer pays your beneficiary the policy’s face value minus the cash value. This means a lower premium for you because it is a lower payout for the insurance company.
  2. Your insurer pays your beneficiary the policy’s face value plus the cash value of the money you have accumulated. This type of indemnity comes with a higher premium.

How much you want to pay is almost completely in your hands. You do have to make sure you cover the monthly premiums but how much additional money you want to invest is up to you. Since universal life insurance has so many options to increase the cash value of your policy, as well as many tax breaks, you can greatly benefit from this excellent money-making venture.

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