What is Universal Life Insurance?
Universal life is the newest form of life insurance and it is also a form of permanent life insurance, like whole life. But it is both more complex, and more transparent than whole life. It is also the most flexible form of life insurance because you can adjust your premiums, and even your coverage amount!
- Permanent Life Insurance – You will have coverage as long as the policy is kept in force. Keeping a policy in force usually means that premiums are paid, or the policy is paid up.
- The insurance part and the cash value part of universal life insurance are unbundled. A portion of your premium pays the life insurance, and another portion can acrue a cash value. This cash value can earn interest at a set rate or be tied to a market index like the S&P 500.
- The cash value may be borrowed against or withdrawn without terminating life insurance coverage. Keep in mind that the life insurance portion must be funded or coverage will not be kept in force.
- You have the option to make flexible premium payments. You can pay a minimum payment, target payment, or maximum payment. You can also adjust the life insurance coverage amount, though some increases in face value may require additional underwriting.
- Cash value can build up while deferring taxes. You need to consult with a financial professional to learn about the many tax advantages of universal life but, of course, death benefits are usually tax free to your beneficiaries.
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Who Buys Universal Life Insurance?
People who want to combine a tax deferred savings vehicle with permanent life insurance should consider universal life insurance. Make sure you understand the positives and negatives of your policy, and make sure you know how your policy will handle a year when your market index is negative. Some have a guaranteed return so you will never lose cash value, but you need to make sure.
No matter what type of life insurance you buy, you can compare life insurance quotes and plans with our safe, fast, and free quoting forms!
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