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Universal Life Insurance Features & How it Works in 2024

Understanding the Functionality and Cost of Universal Life Insurance Explained in [2024]

If I mention this option for coverage, most people will say, what is Universal Life Insurance and how does it work?What is Universal Life Insurance

Universal Life Insurance is a product that most people do not entirely understand, but later find out this plan design is quite simple when you read about how it works.

Universal Life insurance, unlike Term Life insurance, is a permanent coverage option that does not expire, ensuring continuous protection for your family.

Let’s jump in and explain the product and see if it would be a good fit for you.

For those intending to buy life insurance, it’s essential to understand the main types and their functioning.

Consider the distinction between temporary and permanent coverage. Consider Universal Life as a less costly option in place of Whole Life insurance, which many companies no longer offer in their product lines.



What Is the Meaning of 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 Universal Life insurance, let alone how it works. Unlike Term Life Insurance, which provides coverage for a limited time, Universal Life Insurance is a permanent insurance plan. The universal life insurance definition simply means a form of permanent life insurance with a much more affordable premium.

Universal Life Insurance distinguishes itself from term policies and other types with its flexible premiums and extensive coverage options. Universal life insurance cost factors 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 it being higher or lower. You have total control of these 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. Universal Life is based on building a cash value, and the financial performance will depend on investments that the life insurance companies work with.

Once you have paid the initial premiums for a few years, the policy could remain active and require no additional payments as long as the cash value is sufficient to maintain the coverage.

Incorporated in a universal life insurance policy, fixed rates are projected and guaranteed interest rates, providing protection during unfavorable economic conditions.

Each year, policyholders are given a report detailing the current standing and performance of their insurance policy. 

The carriers provide a detailed explanation of your death benefits, current cash value, surrender value, and active life insurance coverage.

The majority of individuals opt for term life insurance due to its affordability compared to universal life. While many term life insurance policyholders outlive the term period, rendering them without coverage when they might still need it, Universal Life prevents this.

Understanding Cash Values and Non-Cash Value Plan Design Choices?

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.

Therefore, if youUniversal Life Insurance Cost consider 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 – The cash value policies have HIGHER PREMIUMS as a negative side effect. I do not recommend this type 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. When you add a cash version to the policy, it will raise the premium all that much more.

So most people would say these policies are not cost-effective, and they can’t afford the premium and would purchase term life insurance.

No Cash Value Policies – If you choose this policy option, you will have lower premiums, and you will still enjoy the fact that you have life insurance protection for the rest of your life.

In addition, this will eliminate the worries of outliving a term policy when you still need life insurance.

This happens to a considerable percentage of term insurance owners. Many of them purchase too short a term 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. Also, health conditions may prohibit the purchase of new life insurance. Cash value universal life insurance is a good product if you can afford the extra cost.

How universal life insurance works is the first question people ask, but after getting some basic information about the product they can see that it is quite simple to understand.

Interest Rates for Universal Life Can Fluctuate Among Insurers and Economic Conditions.

Universal Life Insurance interest rates are typically 8% – 12% for (IUL) indexed 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 a cash value, you will find that the interest rate will vary slightly between oneUniversal Life Insurance Explained carrier and another.

You will generally begin the policy with a designated interest rate stated in the policy if your guaranteed interest rate goes up because of good economic times. 

The additional interest can be 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 Insurance May Be a Good Option if You Are Interested In the following:

There are many Universal Life options to choose from when you apply for coverage.

* The ability to adjust your premiums from year to year.

* An actual cash value you can borrow from while you are still alive.

* Peace of mind with permanent, never-ending life insurance protection.

The E.F. Hutton life insurance company introduced and sold its first universal life insurance policy, the first new design that was made in more than 100 years. The flexible premium characteristics contributed to the plan’s sudden surge in popularity.

Would the Cash Value Growth of Universal Life Insurance Be Beneficial for You?

I personally would not recommend getting a cash value plan design if you want to apply for Universal Life insurance. Some of the newer universal life plans can eliminate cash value.

This would mean no loan options and no interest rates. This also means a significantly lower premium straight across the board.

The cash value component increases the price tag, causing the annual premium to become excessively high, making the policy an unaffordable option, particularly 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 cash value, thereby reducing premiums.

Choosing a Universal life policy with no cash value will considerably reduce your premiums, making this permanent product much more cost-effective!

Investigating the Unique Features of Different Universal Life Insurance Plans

These four versions of Universal Life insurance are plan design options you can choose from.

The four versions are:

Traditional Universal Life:

 The traditional version is the most common form, and most people apply for it. These policies accumulate cash value slower than the other types, but they are considered much safer because they accumulate in money market-type accounts. 

Indexed Universal Life:

 Indexed UL policies are invested into funds that work off the S&P 500. The features and options of indexed universal Life 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.

Variable Universal Life:

 Variable universal life type insurance policies have some options and physical features as 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 fast. The biggest downside is that if there is a turn for the worst in the market, the value of your cash build-up could be reduced.

Guaranteed Universal Life:

 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. I recommend having no cash value and keeping the policy’s cost down.


Universal Life Insurance 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 Universal life plans. 

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 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.

ForUniversal Life Insurance Quotes 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.

The other 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 universal life insurance but it should be considered a good choice for most individuals.


Universal Life will be your best choice if you want life insurance for the rest of your life instead of only a specific period like term products.


Can I Have a Combination of Term Life and Universal Life Insurance Contracts?

Having Term Life Insurance and Universal Life Insurance as a combination, offers lifelong coverage at affordable premiums.

Combining a term and a universal life policy 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. In addition, low-cost term life insurance can cover the most financially volatile times of a person’s life. 

The 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.


When Is the Most Advantaged Time to Apply for a Universal Life Insurance policy?

As with any life insurance product, the best time is as soon as possible. Universal life insurance quoting rates go upUniversal Life Insurance Policy Quote every year as you get older. Waiting to buy your new life insurance plan will always cost you higher premiums.

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 be declined.

Where Should I Go to Secure the Best Universal Life Insurance Coverage?

The best place would always be through an independent insurance agency such as ourselves. Independent insurance agents represent all significant companies, unlike captive agents like State Farm or Country Financial.

Also, the independent agents (also known as brokers) know all the underwriting requirements involved, so you apply with the most applicable company.

Using the most applicable carrier is vital to getting the best rates. We have been selling universal life for almost thirty years.

What Steps Should I Take to Secure the Most Affordable Rates?

Universal Life Insurance policy quotes will depend on your health more than any other deciding factor, just like any other life product.

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 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.. 


How Does Marijuana Use Affect the Cost of My Universal Life Insurance?

If you smoke marijuana on a daily basis you could be issued a smoker rate which could double your rates.

If you smoke marijuana for recreational or medical reasons, that will not be a problem in some cases. If you smoke marijuana on a regular basis you will be headed for a tobacco smoker rate which will double your rates at least.

We use manyUniversal Life Insurance Features top-rated companies to allow you to smoke marijuana without placing you in a smoker rate classification if possible.

The only exception would be for an application that is a heavy smoker who uses it every day of the week.

Marijuana users now face less stringent underwriting requirements from many life insurance companies. 


Can I Save Time by Applying Over the Telephone?

Applying our SnapApp application system over the telephone will make applying for universal life insurance simpleuniversal life insurance policy meaning 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 you must listen to a series of questions and then answer them.

There is no other way that is this simple to apply for life insurance.


What Is a Health Assessment and How Does It Work?

 A Health Assessments 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 just an option and is very simple and takes about 10 minutes to complete. All it amounts to is having the applicant answer a few questions if they have any medical conditions, a dangerous occupation, or a hazardous sport or hobby.

This information is vital to your agent, who will decide what life insurance company to apply with.

A health assessment is not necessary if you don’t have any medical conditions, hazardous occupations, or dangerous sports. However, if you have any of these conditions, a pre-screen can save you money by applying with the most applicable life insurance company. 


Our Final Thoughts

After reading this post, I am sure you have a much better understanding of what Universal Life insurance is and theUniversal Life Insurance Definition advantages it offers. However, you must have many questions, so don’t hesitate to contact us seven days a week. 

Feel free to use our quote engine to compare all the best universal life insurance quotes.

All the best,
Jack Venturi

*For any questions you might have, our live chat system is at your disposal or call us at 815-390- 7545 and we will provide a quick answer.

If you have any questions about universal life insurance, contact us today for all the help you need at no cost or obligation. You can also set up a time at your convenience to talk.  


Jack Venturi Independent Life Insurance Agent

Jack Venturi

Independent agent and founder of

Jack Venturi has over 30 years of experience selling individual and commercial insurance including Property & Casualty, Health, Disability and Life insurance. Jack has helped thousands of people all across the United States purchase the best life insurance products at the lowest possible premiums over the phone (815)-390-7545 and online.

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