Definition of Universal Life Policies

One three main types of full coverage life insurance policies are universal life policies, variable life, and whole life. Like whole life insurance, universal life insurance is cash value based. Cash value in this case refers to the amount of money that you pay into the policy over and above your premiums and fees. This additional cash is put into a special account that accrues interest that you agree upon with your insurer prior to signing. Usually this savings account is attached to a mutual fund, bond, or financial index and is designed to grow your money in the long run.

Do you need universal life policies?

Term life insurance generally gives you a lesser value for your dollar than universal life insurance. With universal insurance you might spend a little more in premiums, but you get a cash value savings account included with the deal. You take care of your insurance and savings account in one.

What is variable universal life policies?

Each life insurance category has a sub-category or two and viable universal insurance is a sub-category of universal life. It will give you a permanent policy that has no expiration date, but they usually have the cash value portion tied almost exclusively to a mutual fund account instead of bonds and/or indexes. While mutual funds can be unpredictable and riskier, the stocks invested in are generally fairly stable and promise a much more lucrative balance in the end. If, however, you are uncomfortable with trusting in the unpredictable instability of a mutual fund, this may not be the best option to you.

How does universal coverage stack up against whole life coverage?

The fundamental differences between a universal policy and a whole life policy vary slightly. A universal life policy gives you variable sliding scales with mortality costs, expense projection rates, and cash value amounts. A universal policy carries the option of having no investment risk in the cash value and gives you the ability to adjust your premiums and death benefit values. You’ll also get, with a universal policy, the option of suspending your premiums for a set period of time if the need arises.

How can you use universal life policies?

There are a lot of ways you can use a universal insurance policy. The advantages lie in the amount of things you can do with the policy over and above the death benefits. The whole point in acquiring a universal life policy is for this very reason. You can even get policies that have something attached to them called “accelerated benefits”. These benefits will help pay for long term care for situations where the insured requires additional help and care due to illness or age. You can also use cash withdrawals from the accrued cash value account that is equal to that amount, if not greater than. Keep in mind, though, this should be used only on an emergency basis.

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