Universal Life Insurance

Selecting the life insurance plan for your needs depends on different factors. Whether you want to invest a portion of your paid premium or consider the dependents on your income while choosing. Universal Life insurance offers you flexibility while combining the best part of term life and whole life insurance.

It allows you to adjust your premium payments as well as a cash value accumulation that grows with time. But it’s more flexible, it might be more complicated as compared to other policies. Let’s have a close look into this insurance plan to understand.

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance. With this policy, the policyholder is covered for his whole life as long as he pays the premium and meets other requirements of the plan. Just like many other types of permanent plans, universal insurance also has a saving component called cash value.

However, before choosing a universal plan to buy, consider all its types and then go for the best according to your needs and budget.

How Does it Work?

Universal insurance allows you to adjust your premium payments offering you an amazing option especially when your cash flow is variable. Not just premiums, you can also adjust your death benefit. It means you can lower the death benefit if you think you don’t need it that much now.

Likewise, you can also increase the death benefit if you want to. But for this, you have to go through some more underwriting process to get an increase. However, the death benefit of the policy will be payable to the designated beneficiaries upon the death of the insured.

Benefits of Universal Life Insurance

Here are some of the benefits that make universal life policy unique and people opt for it while choosing life insurance:

Lifelong Protection

After getting the plan, it goes into effect on the very first day. It also provides a death benefit that is income tax-free so your family doesn’t have to suffer after your death. Your coverage will remain a lifetime and can’t be canceled until you pay the premiums.

Flexible Premiums

With this plan, you can raise or reduce your premium within a certain limit as your circumstances change. While sometimes you may have to pay higher premiums to keep your plan active. However, the flexible premium feature of the policy makes it an exciting option if your income varies.

Cash Value Component

The policy has a built-in cash value component that increases with time and earns interest for the insured. In addition, the policyholder can take out loans or withdraw against this cash value to pay his premiums or to fulfill any other need.

Tax Benefits

The amount in the cash value account grows on a tax-deferred basis. So there will be no taxes on your current earnings or interest as well and the death benefit payable to the beneficiaries is income-tax-free.

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Types of Universal Life Insurance

Generally, there are three main types of universal insurance plans. Below is the detail of them:

Indexed Universal Life Insurance

This plan has lifelong coverage along with flexible death benefits and premium payments. However, the cash value part in this part is connected to a stock market index like the Nasdaq-100 and S&P 500. The insured also has an option of fixed-interest investment. Having this plan doesn’t mean that your amount is invested in the index. The insurance provider invests in bonds and it will be more risky. So if you are okay with taking on more investment risks, you can opt for this insurance plan.

Variable Universal Life Insurance

This type of universal plan also allows you to change premium payment and lump sum amount, within certain limits. But you have to actively manage this plan as you will choose sub-accounts for your cash value investments. The insured can also choose a fixed interest rate for cash value as part of his investments. Moreover, with variable insurance, the policyholder has the potential for good returns on the cash value along with some control over his investments.

Guaranteed Universal Life Insurance

This type comes with a death benefit and premium payment that may not change with time. The policyholder has to choose an age like 90, 105, 0r 121 at which this plan ends. Choosing a higher age means paying higher premiums It is the cheapest type of universal life that also has a little cash value. Sometimes it is also called “no lapse guarantee universal life insurance”. Newer no-lapse plans claim to stay active but if you miss a payment, your policy will terminate. As there is little cash value there won’t be any amount to take away. The insurer will keep your paid premiums.

Who should consider getting Universal Life Insurance?

You can consider this life insurance plan if you want your premium payments to be adjustable. Moreover, you can also opt for its different forms if you want the cash value accumulation more than a small fixed percentage. Both indexed and variable universal insurance offer this option if the underlying investments perform well.

Still confused about getting a life insurance plan? No worries, our expert agents at Insure Guardian are here to help you out. Call us now at +1(800)6956528 and we will be happy to assist you.

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Our licensed agents at Insure Guardian strive to offer you free consultation and guidance about your life insurance plan. For a free quote consult our professional now at +1(800)6956528.