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There are many different types of life insurance available, so it’s helpful to understand more about them, such as universal life insurance. We’re going to discuss some of the issues concerning this type of insurance so you will be better prepared.
Financial Investment Opportunity Although universal life insurance is very similar to whole life insurance, it enables you to each interest on the cash value of your policy. Therefore, universal life insurance can be purchased as a financial investment. You premiums will be divided into one part that pays for the cost of insurance and another part that represents your policy’s cash value. You will earn interest on the cash value of your universal life insurance policy, and certain policies will even guaranteed a minimum amount of interest. Protect Your Family Members Universal life insurance is flexible, but will also protect all of your family members. This type of insurance provides you with not only guaranteed death benefits, but also a financial investment. If you take advantage of a policy’s term riders, you can change the amount of your benefits without having to buy a new insurance policy. You may also have the option of adding other individuals such as your children or spouse to your policy. This is one of the reasons why many families choose to purchase universal life insurance coverage. Tax-Free Investments Another advantage of universal life insurance is the fact that you can defer any capital gain taxes. You can retain these gains as cash value of your policy until you die, at which time they will only be charged estate taxes. Another option is to borrow against the cash value without having to cancel your policy or pay any taxes on the amount. Most universal life policies enable you to decide what percentage of your premium you would like placed into the tax-sheltered amount. You can choose to invest in mutual funds or safer, guaranteed investments. Universal life insurance Options There are three different types of premiums with a universal life insurance policy: Single Premium – You pay one amount for a single premium policy which remains valid as long as the cost of insurance doesn’t exhaust the investment or cash value. Fixed Premium – With a fixed premium policy, you make monthly premium payments for a specified period of time, and your policy will normally remain valid after you stop paying the premiums. Flexible Premium – You can choose when to make your payments and how much to pay if you choose to purchase a flexible premium universal life insurance policy. If you fail to pay a premium for a certain period, the cost of insurance will be deducted from your policy’s cash value. You can also make one larger payment when you purchase a universal life policy, and then make smaller payments according to your financial ability. The majority of universal life insurance policies include a Waiver of Premium option which enables you to keep your coverage without paying additional premium payments if you become disabled. Universal life insurance enables policy holders to protect their family and invest in the future while enjoying tax-free savings. If you’re interested in the flexibility of universal life insurance, be sure to discuss the various options with your insurance agent. |
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