What is Universal Life Insurance?
A. Universal life insurance is a flexible adjustable life policy, which incorporates annually renewable term insurance with an interest bearing side fund (cash value). The insured may vary the amount and timing of the premium payments to adjust the cash value and/or the death benefit of the policy.
A. Universal Life Insurance blends the features of Term and whole life for a policy that can last your entire life but will be less expensive than whole life. The interest which the policy earns is based on the economic criteria which can vary from year to year. The policy earns cash value, is available in high face amounts like Term and Whole Life, and is flexible. That is, you can change the premium or the face value as your needs change. If you want to save money but still have lifelong protection, Universal is an excellent choice.
This is adjustable life insurance that allows flexible premium payments,* pays the life insurance benefit if the insured dies before the maturity date, and pays the cash value if the insured is living at the maturity date. A flexible premium is one that may be paid at a scheduled or unscheduled time. When a premium is paid, an expense charge is immediately deducted and the balance is placed in a cash value fund to earn interest at the current rate. Each month, all insurance expense charges necessary to keep the policy in force are paid internally from the cash value, regardless of whether or not the premium was paid. The cost of insurance will increase each year on the policy anniversary based on the attained age of the insured. This is a non–participating policy on which no dividends are payable. * The policy will terminate at any time if the cash surrender value is insufficient to pay the monthly deductions. This can happen due to insufficient premium payments, if loans or withdrawal
Universal life insurance is a combination of annual renewable term insurance and traditional whole life insurance that offers considerable policy flexibility and affordable insurance protection. Actually, universal life can be defined as term insurance with a side fund that grows cash value. Insurance costs, like annual renewable term insurance, can increase annually based on the age of the covered individual. As premiums are paid, insurance costs and fees are reduced form the policy’s cash values. Any remaining cash values grow at a current fixed interest rate. Policy premiums are adjustable as long as there is sufficient cash value to cover policy expenses. Insurance amounts can also be adjusted to meet changing needs. For more details see, “How a Universal Life Insurance Policy Works.
