What is Universal Life Insurance?
Universal life insurance is a flexible life insurance plan. These policies are interest-sensitive and permit the owner to adjust the death benefit and/or premium payments, within limits, to fit the owner’s situation. Your net premium payments are applied to the accumulation fund, which earns a guaranteed interest rate. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund. As with whole life insurance, the cash value is yours you may withdraw it or borrow against it at any time. Read your policy carefully to understand how withdrawals may affect the death benefits. Since you decide how much premium to pay, within limits, some universal life policies even allow you to skip payments. If you skip a premium payment, the administrative and death benefit costs are deducted from your cash value. The policy stays in effect until your cash value can no longer cover these costs. Make sure you understand your annual statement so you know how much i
Introduced a couple of decades ago, it is a type of cash value insurance that allows greater flexibility than a traditional whole life plan. Universal Life Insurance provides coverage and builds cash value. It is a flexible type of permanent life insurance, allowing you to make adjustments to the amount of your premium or death benefit at any time. A universal life insurance policy provides lifelong coverage and accumulates tax-deferred cash value over time. Universal Life has several unique features not found in whole life policies. Specifically, the policyowner is provided with the flexibility to vary the timing and amount of premiums and the face amount, depending upon present needs.
Universal life is one of the most flexible types of life insurance you can buy. Insurers who offer these policies let you decide how much to pay into them every year, subject to specified minimums and maximums. The insurer will recommend a target premium, which is the amount you would have to pay to keep the policy in force to age 100. But you’re always free to pay less or more. A universal life policy also lets you choose how large a death benefit you want your premium to buy. For example, you could choose a level death benefit and greater cash values or a rising death benefit and lower cash values. You can also take money out of a universal life policy without treating the money as a loan.
