UNIVERSAL LIFE
WHAT IS UNIVERSAL LIFE INSURANCE?
Universal life insurance is a type of permanent, cash-value life insurance. Under the terms of the policy, the excess of premium payments is credited to the cash value of the policy with interest. The premium and death benefit amounts of a specific policy can be changed without needing an entirely new policy.
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A minimum premium is required to keep the policy in force. If there is enough money in the cash value, you can skip premium payments entirely, letting the accrued interest cover the cost of the premiums until the cash value is depleted.
With universal life insurance, you pay a monthly fee that splits into two parts. One part covers life insurance, and the other part goes into savings and investment.
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Universal life insurance is meant to be more flexible than other types of life insurance by allowing the policyholder to choose how much premium is paid (within a certain range). The minimum amount is set by the cost of insurance, which includes a death benefit and all administrative fees.
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Anything paid over this premium is added to the policy's cash value, which is guaranteed to grow according to a minimum annual interest rate set by the insurance company, although it can grow faster depending on how well the market is doing.
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Many people choose to pay the maximum premium possible, as set by the IRS, in the early years so they can build a larger cash value (and then use that cash to cover premiums later in life).
HOW DOES
UNIVERSAL LIFE
INSURANCE WORK?
WHAT IS A
GUARANTEED
UNIVERSAL
LIFE OPTION?
A guaranteed universal life (GUL) option combines term life insurance and whole life insurance. GUL can provide lifetime coverage at more affordable pricing than a whole life insurance policy. This product may be ideal for individuals who want lifelong death benefit protection but don’t need the cash value. GUL policies have guaranteed death benefit amounts, as well as options to decrease the death benefit if needs change and to receive a return of premiums.
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As long as you pay your planned premiums to keep your policy active, your beneficiaries will receive the guaranteed death benefit when you die.
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If your needs change as time goes on, you also have the option of decreasing your death benefit without having to buy a new, separate policy. This can be helpful if your budget changes and you need to lower your premiums or if your financial responsibilities decrease and you no longer need as much coverage.