Universal Life Insurance

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance that includes a savings plan based on a cash value. When you have universal life insurance your premium payments in excess of the cost of the insurance are invested, a feature that allows for the accumulation of savings over the life of the ploicy. You can often use the interest from your accumulated savings to pay your premiums, helping the policy to pay for itself.

Universal life insurance is very flexible. You can shift money between the insurance or savings aspect of your policy as needed. Universal life insurance premiums are variable and the cash value of your investments is allowed to grow at a monthly adjusted variable rate.

What is the Difference between Universal and Term Life Insurance?

Universal life insurance, like whole life insurance, is intended to provide for your entire lifetime. It is considered a permanent insurance. Because a universal life insurance policy will last for your entire life, you know that your beneficiaries will receive money upon your death. Term life insurance doesn’t make that guarantee, because it only pays if you die during the term in which you have paid for coverage.

If you only require insurance for a short period of time, term life insurance is the better option. If you want life insurance that will last throughout your lifetime, buy universal insurance and lock in lower rates while you are young. Term life rates get higher as you get older, making term more expensive to buy later in life.

What is the Difference between Universal and Whole Life Insurance?

Universal and whole life insurance are the two types of permanent insurance that are available to policy holders. Even though they are both intended to last for the duration of your life, there are a few basic differences between the two. Universal life insurance was actually developed from whole life insurance but it is much more flexible. Universal life insurance has a greater potential for its cash value to increase.

Universal life insurance is also more flexible than whole life when it comes to the death benefit and premium payments. When you have universal life insurance it is possible to increase or decrease your death benefit without having to surrender your policy. When you try to do this with whole life insurance, you must get a new policy, which might increase your premium payment.

Universal life insurance also has many more flexible exit options than whole life insurance. One of these options is a zero interest loan that will allow you to access the monetary growth of your policy while avoiding tax penalties.