Universal Life Insurance
What is Universal Life Insurance?
Universal life is a form of permanent life insurance. This type of insurance offers the benefits of traditional whole life insurance–lifelong coverage and a savings component–but with added flexibility. Just like whole life insurance plans, universal life insurance guarantees that your loved ones will receive a lump sum when you pass away, however the amount of the lump sum is not fixed with universal life insurance. This type of life insurance gives the policyholder the option to increase or decrease their premiums throughout their lifetime as long as they stay within the limits outlined in the universal life insurance contract. This flexibility means that the death benefit will be determined by the premium payment history, although there is often a minimum amount stated in the plan. With a Universal life insurance policy you’ll also be able to adjust your death benefit coverage amount. This adjustment isn’t possible with many other types of plans, including whole life and term life. The ability to change your coverage is actually one of the biggest benefits of universal life insurance since it means that the plan can grow and change with your family and coverage needs.
How do Universal Life Insurance Plans Work?
These policies require you to pay a monthly insurance premium in order to maintain your coverage. Universal life insurance plans also build a cash value that earns interest and can grow like a savings account. Part of the premium amount you pay each month will be used to pay for the cost of insurance coverage; any additional funds will be placed into the savings component of the policy. Policyholders can withdraw or borrow funds from the savings fund if needed. However, it is important to remember that withdrawing money can reduce the value of the final death benefit. After you pass away, the death benefit and any additional funds in the savings component of the plan are paid out tax-free to your beneficiaries. Your universal life insurance can be guaranteed or non-guaranteed. On a non-guaranteed life insurance policy you face the risk of the policy lapsing if the premiums go unpaid and the cash value of the account is no longer sufficient to cover the cost of the policy. Guaranteed life insurance policies offer a so called no-lapse guarantee. It means that the policy will remain in-force for the guaranteed period as long as the minimum premium payments are made. Guaranteed universal life policies are a convenient and reliable form of final expense insurance, which typically have low face value and are purchased to cover the cost of burial and other final expenses.
Why Choose a Universal Life Insurance Plan?
Universal life insurance is a great way to get life insurance that lasts for life, not just a fixed term. Universal life plans are more affordable and flexible than whole life, meaning you can adjust the plan to fit your needs. Life insurance coverage requirements are often based on our best guesses for our future needs. A universal plan allows people to adjust the coverage as their lives and needs change so you actually only pay for the coverage you need. In addition, the flexible payment policy can help ensure that life insurance fits into your budget year after year.
Is a Universal Life Insurance Plan the Best Fit for Your Needs?
Universal life insurance policies offer many benefits. However, it isn’t the best fit for every situation. On one hand, if you are seeking long-term protection in an insurance policy (15 years or longer), universal life insurance may be the perfect type of policy for you. On the other hand, if you have no plans to keep your policy long-term, or you have specific costs that you’d like covered for a fixed term (for example to provide protection for childcare costs) you may want to consider term life insurance instead. There are some disadvantages that may not make universal life insurance the optimum choice for your life insurance coverage. The main downside to these policies is that universal life insurance premiums are generally higher than term life policy premiums. This can be cost prohibitive to families looking for affordable life insurance options. However, if you value flexibility over cost and want a policy that can adapt to your changing needs, consider choosing a universal life plan.
Universal Life Insurance Coverage Uses
Universal life insurance can provide coverage for many types of expenses, some of the most common uses include:
- Final Expenses – cover end of life costs
- Estate Tax – protect your family from inheritance expenses
- Charitable Contributions – leave a legacy to a charity close to your heart
- Retirement Income – use the savings component to boost your retirement income
- Inheritance – leave a lump sum to your family
- Childcare costs – cover the expenses of looking after young children
- Special – needs Family Members-provide for vulnerable members of your family
- Small Business Owners – give your business a financial boost while your family takes over control
The great thing about universal life coverage is that it can be adjusted as your needs change. For example, if you no longer need coverage to pay off the balance on your mortgage, you can reduce the coverage and turn your premiums towards meeting your new needs. You can also increase the coverage limit if you take on additional debts that you’d like to protect your family against.
Get a Universal Life Insurance Quote
To find the best universal life insurance policy for your needs, you should compare quotes from numerous providers using IntelliQuote®’s online quote service works with the best-rated insurers to bring you quotes for quality life insurance coverage. IntelliQuote can also offer personalized quotes for universal life policies over the phone and help you determine which type of policy best meets your individual needs and requirements. To discuss your options further, or get assistance with obtaining a free, no obligation quote, please contact our licensed agents at 800-963-6405.