Universal Life Insurance

Universal life insurance is a permanent policy based on cash value. In other words, the insurance policy is credited for each payment and then debited the cost of the policy each month. The interest is then deposited in an account, stock, bond, etc. determined by the insurer for their use.

The interest earned on a universal policy can be spent in a variety of ways. These include income replacement, debt coverage, paying final expenses or simply as an alternative to long-term care insurance. These payment options may be limited depending on the type of universal life insurance you sign up for, so it is important to do your research before buying.

How it Works

Like all policies, universal life insurance provides your loved ones with a death benefit. Simply put, a sum will be paid when the policy holder passes away. This money can be used to pay funeral costs, leftover medical bills and the like. This type of policy goes beyond basic insurance and allows the policy holder to use it as a savings vehicle.

Unlike other policies you usually do not have to pay premiums throughout the entire length of your plan. A payment schedule is set up when you first establish a contract and you are given the option to pay more if you find it appropriate. This payment structure is intended for someone who plans to hold onto their policy for several years, giving it time to develop into a substantial savings as the interest accumulates on the account.

Because this plan is intended as a long term investment, health will be a strong factor in determining your eligibility to sign with a company. This plan is intended for those who will need coverage when they are in their seventies or older. If you have a severe medical condition or smoke your application may not be accepted. You may also wish to reconsider working with this type of policy if people in your family do not typically live to a significantly old age.

Types of Universal Life Insurance

There are three basic types of universal policies. These include fixed, flexible and single premium life insurance plans. It is vital to know the difference between these universal life policies so you can determine which is the best match for your family.

Fixed premium universal life insurance typically allows you to make steady payments with a guarantee that there will be no lapse in the coverage. Because universal policies are dependent on cash value, this can mean that the policy loses its value over time. Should this happen the insurer has the option of adding additional payments, lowering the death benefit enacted when a claim is filed or allowing the policy to expire early when the count is depleted.

Flexible premium life insurance, on the other hand, allows the insurer to vary their premiums within specified guidelines. This way you can lower monthly payments when your budget becomes tight, so long as you keep the premium high enough that you are covering the cost of your universal life insurance. You can also increase your deposit if the cash value varies to guarantee a level payout when the policy is cashed.

The most unique type of universal life insurance is the single premium. The policy is named as such because they are intended to only pay one premium to the insurer at the start of the contract. Payments are then deducted from the account on a regular basis. The life insurance policy ends when the account is depleted.

Single universal life plans are an attractive type of universal coverage because they are typically tax differed. This way withdrawals can be made on the interest of the account without being penalized. Making a material change or adjusting the premium on this policy can cause it to lose its tax advantage, so it is important to discuss the proper way to manage this policy thoroughly with your universal life insurance provider.

Finding a Policy

The easiest way to locate a plan is to shop online. All you need to do is enter a bit of basic health and financial information into a search and you will be automatically paired with several quotes that meet your needs. These websites boast a significant amount of security so you do not need to worry about your personal information being stolen.

Be sure to read each universal life insurance quote carefully so you fully understand the terms you may be agreeing to. Call the agency with any questions you have about their coverage, payment plans or any other concerns that arise while shopping. Do not let this opportunity to take care of your end of life expenses and build a substantial savings pass you by. The perfect plan for you and your family is only a click away.

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