Discover the Essential Information You Need to Know About Universal Life Insurance in 2025 + YouTube Video
When I mention this option for coverage, most people will ask, what is Universal Life Insurance and how does it work?
Universal life insurance is a product that most people have never heard of. You will soon find out how these excellent policies work, and if they would be a good choice for your new policy.
Unlike term life insurance, this is a permanent coverage option that does not expire, ensuring continuous protection for your family.
Let’s jump in and explore the benefits of universal life insurance and see if it would be a good fit for you.
Table of Contents
What Is Universal Life Insurance?
The Universal Life Insurance definition that follows will clarify the nature and benefits of this outstanding insurance solution.
Few people are familiar with this product, let alone how it works. Unlike term insurance, which provides coverage for a limited time, universal life is a permanent insurance plan. Universal life insurance by definition simply means a form of permanent life insurance with an affordable premium. This is especially true when universal life is compared to whole life insurance.
These policies distinguish themselves from term policies and other types with their flexible premiums and extensive coverage options. These plan designs have cost factors that can vary at your own discretion.
Premium payments under these policies can be tailored to your needs. The premium you pay can fluctuate from one year to the next, with premiums being higher or lower. You always have total control of these premium features.
You can take a break from making premium payments on your term insurance policy for an extended duration without the risk of policy cancelation.
These products are permanent policies that will not expire as long as you pay the minimum premium. UL policies are based on building cash value, and the financial performance will depend on investments that life insurance companies work with.
Once you have paid the initial premiums for a few years, the policy can remain active and require no additional payments as long as the cash value is sufficient to maintain the coverage.
Independent agents such as ourselves offer Universal Life Insurance from over 40 top rated carriers.
Benefits of Working With an Independent Insurance Agent: YouTube Video
The majority of individuals opt for term life insurance due to its affordability compared to UL policies. While many term life insurance policyholders outlive the term period, rendering them without coverage when they might still need it, universal life policies prevent this from happening.
Understanding Cash Value vs. Non-Cash Value Plan Designs
There are many universal life insurance benefits, especially if you choose a cash value plan design.
You will need to make this important decision because there are two main versions of universal life plan designs.
Therefore, if you
are considering purchasing a universal life policy, one of your first and most important decisions will be what version of these policies you should apply for.
Here is a simple comparison of what I am referring to:
Cash Value Policies:
Cash value policies have higher premiums as a negative side effect. I do not recommend this type of policy because the interest rate is not high enough to warrant higher premiums even though you will build a cash value.
You also have to consider that universal life policies cost more than term policies. Adding a cash-value version of the policy will further raise the premium.
Many people would say these policies are not cost-effective, and they can’t afford the higher premiums. This is where the non-cash value plans excel, with their more affordable pricing structure.
Non-Cash Value Policies:
If you choose the non-cash value version, you will have lower premiums, and you will still enjoy the fact that you have life insurance protection for the rest of your life.
This will eliminate the worry of outliving a life insurance policy when you still need to have life insurance in force.
This happens to a large percentage of term insurance owners. Many of them purchase a policy for too short a time period and outlive the policy.
If they later decide to buy a replacement policy, they will find the new policy will cost much more because they are older. You also have to keep in mind that health conditions may prohibit the purchase of new life insurance. Cash value universal life insurance can be a good product if you can afford the extra cost.
Some people believe that universal life insurance may be complicated, but after getting some basic information about these products they can see that it is quite simple and basic to understand.
Interest Rates Can Fluctuate Among Insurers and Economic Conditions
Universal Life Insurance interest rates are typically between 8% – 12% for IUL (Indexed Universal Life) plan designs and usually between 6% – 7% for (fixed interest rate) plan designs.
In a country like ours suffering from horrendous inflation, interest rates are down on all financial products. Normally, if you choose a policy that generates cash value, you will find that the interest rate will vary slightly between one carrier and another.
You will generally begin the policy with a designated interest rate stated in the policy. The additional interest is credited to you, making the policy grow. If this happens, a universal life insurance policy can perform very well. Previously in past years, interest rates were greater, with CDs boasting higher rates as well.
Universal Life May Be a Good Option If You Are Interested In the Following:
1. The ability to adjust your premiums from year to year.
2. The actual cash value you can borrow from while you are still alive.
3. Peace of mind with permanent, never-ending life insurance protection.
The E.F. Hutton Life Insurance Company introduced and sold its first universal life policy, the first new design in more than 100 years. The flexible premium characteristics contributed to the plan’s sudden surge in popularity.
Is the Cash Value Growth of Universal Life a Good Investment?
I personally would not recommend getting a cash value plan if you want to apply for Universal Life. Some of the newer universal life plans can eliminate the cash value, which in turn would lower premiums.
This would mean no loan options and no interest rates. But it also means significantly lower premiums straight across the board.
The cash value component increases the price tag, causing the annual premium to become more costly, making the policy an unaffordable option for some people. This is particularly true for those requiring a substantial face amount.
Universal Life Insurance offerings from Protective Life boast superior performance, and you have the option to select a policy without a cash value.
Special Features of Universal Life Insurance
These are the four versions of the universal life plan design options. The four versions are:
1. Traditional Universal Life Insurance:
The traditional version is the most common form, and most people apply for it. These policies accumulate cash value more slowly than other types of policies, but they are considered much safer because they accumulate in money market-type accounts.
2. Indexed Universal Life Insurance:
Indexed UL policies invest in funds that track the S&P 500. The features and options of an indexed universal life policy are similar to those of a traditional universal life policy. These policies are usually used in conjunction with other investment vehicles in a long-term portfolio.
3. Variable Universal Life Insurance:
Variable UL policies have a few options and physical features, just like indexed universal life insurance policies do. They connect the cash value account in the policy to real investment funds that trade in different types of equities and bonds.
The risk is much greater, but the cash value can multiply quickly. The biggest downside is that if there is a turn for the worse in the market, the value of your cash build-up could be reduced.
4. Guaranteed Universal Life Insurance:
Guaranteed versions of these policies are very similar to term life insurance plan designs. They usually do not have any cash value or flexibility in paying premiums.
The premiums for these kinds of policies are much more affordable. It’s recommended to have no cash value to keep the policy’s cost down.
Universal vs. Whole Life Insurance
For individuals who desire continuous life insurance coverage throughout their lives and do not view the cash value feature as essential, universal life is the recommended insurance product.
The accumulation of cash in a whole life policy is typically more substantial and quicker, but the associated costs will be significantly greater than those of UL plan designs.
The financial burden of Whole Life Insurance quotes often results in potential buyers rethinking their decision. Whole life is still used on a common basis with final expense life insurance with very low face amounts.
The greatest difference between whole and universal life insurance is the cost factor. People are not going to be able to afford a whole life with today’s much higher death benefits.
Whole life and universal life insurance are both good products, but they have their own place depending on someone’s specific needs.
Who Would Benefit From Universal Life?
The best candidates for universal life insurance would be young people who will normally outlive term life insurance.
For
example, if a 25-year-old male purchased a 30-year term policy, the policy would expire at age 55.
Thirty years is the usual maximum time limit for a term plan; therefore, he would, in many cases, need life insurance past the age of only 55 years.
Another consumer who would benefit from a universal product would be the individual that specifically wants life insurance for the rest of their lives.
Many want their life insurance to protect their family members for their complete lifespan and not ever terminate.
Protective Life and Banner Life have great universal life products and very competitive rates.
There are always going to be pros and cons of these policies but it should be considered a good choice for most individuals.
Combining Term and Universal Life
Having both term and universal life insurance as a combination offers lifelong coverage at affordable premiums.
Combining both policies can create the perfect life insurance portfolio. I consider this to be the best of both worlds. An individual does not have to make a specific choice of which plan to buy.
Having a combination of the two is fantastic and makes a perfect combination. Low-cost term life insurance can cover the most financially volatile times of a person’s life.
A universal life policy can be used to continue after the term expires. Usually, a much smaller face amount can be used for universal life.
This gives the policyholder life insurance protection and the money-saving feature of using term life insurance along with coverage to the very end thanks to universal life insurance.
When Is the Best Time to Apply?
As with any life insurance product, the best time to buy is as soon as possible. Life insurance quoting rates go up
every year as you get older. Waiting to buy your new policy will always increase your premiums due to your advancing age. Life insurance procrastination is very costly to say the least.
Time is money when buying life insurance. Apply as soon as possible to lock in your rates before you get any older than you are.
Also, keep in mind that health conditions start to develop as the years go by. This happens to everyone, with no exceptions to the rule. Anytime you develop a health condition, especially a serious one, your life insurance rates will be impacted when you apply.
If your health condition is severe, your application may even be declined.
Universal Life Insurance Quotes: How to Find the Best Rates
All universal life insurance quotes will depend on your health as the most important deciding factor.
Getting the lowest rates possible will depend quite a bit on your agent’s performance and what companies he represents. You can instantly review the best universal life insurance quotes on our quote engine.
We use over 40 top-rated life insurance companies to ensure we provide our applicants with the lowest rates at any given time.
You can run our website’s quoting system to get a head start and see who has the lowest rates. You can compare all the best universal life insurance quotes in less than a minute..
Save Time & Apply Over the Telephone
Applying through our SnapApp application system over the telephone will make applying for life insurance simple
and easy. In years past we had to use either a 30 page paper application or a confusing online application using a computer.
A telephone application will take about twenty minutes, and all you have to do is listen to a series of questions and answer them.
There is no other way that is more simple and quick than telephone applications.
What Is a Health Assessment?
A health assessment is simply a 5-10 minute conversation with your agent concerning health conditions you may have that could impact your rates and help determine what carrier to apply with.
Completing a simple health assessment is easy and takes about 10 minutes at the most to complete. All it amounts to is having the applicant answer a few questions to see if they have any medical conditions, a dangerous occupation, or a hazardous sport or hobby.
This information is vital to independent agents such as ourselves, who will help decide which life insurance company to apply with.
A health assessment is not even necessary if you don’t have any medical conditions, hazardous occupations, or sports that could affect your rates.
Our Final Thoughts
After reading this post, I am sure you have a much better understanding of what universal life insurance is and the advantages it offers. However, you must have some questions, so don’t hesitate to contact us seven days a week.
Feel free to use our quoting system to compare all the best universal life insurance quotes.
All the best,
Jack Venturi
Should you have any questions or need further assistance, please don’t hesitate to call us at 708-334-6226 for a prompt response.
