The odds are you probably have never heard of Universal Life insurance. Most people have heard of Term life insurance and Whole Life but not the Universal form of life insurance. Let’s dive in and explain what this product is all about and would it be a good fit for you. If you are planning on purchasing life insurance, you should be aware of the basic forms of life insurance and how they work. If you need life insurance for just a limited amount of time or for the rest of your life, you need to do your research.
What Is Universal Life Insurance all about?
First of all, Term life insurance is a great product but it is temporary life insurance. Here is a description of the conventional version of Universal Life insurance. Conventional Universal life policies offer a form of flexible premiums that let you adjust how much you will pay each year by examining the policy’s cash value. Just keep in mind that you will still have to pay a minimum amount to keep the policy active. In the beginning of the policy years, you may have to wait until enough cash value is built up. If it is built up enough, you could even periodically even skip a premium. If you do not use any of the cash value in the form of a withdrawal. The cash value will just grow and grow especially if you have a good interest rate.
You will normally begin the policy with a designated interest rate that is stated in the policy. If your guaranteed interest rate goes up because of good economic times. The additional interest can be credited back to you which can really make the policy grow. If this actually happens, the Universal Life policy can outperform a Whole Life insurance policy. Years ago the interest rate used to be much higher than today. You can see the same trend with CDs which used to be very popular.
Universal Life insurance policy might be a good option for you if you want:
- The ability to adjust your year to year premiums
- An actual cash value you can borrow from while you are still alive.
- The biggest feature is permanent life insurance that will last the rest of your life unlike Term life insurance.
Do I really need the cash build-up that Universal Life offers?
The new modern form of Universal Life insurance has No Cash Value what so ever. There are no loan options, no interest rate, just life insurance period. The best description of the end result is the premium is much lower. Conventional Universal Life insurance traditionally can cost too much money making it a impractical plan design for the average American.
In my humble opinion, forget about the cash value build-up option and go for the premium savings. Universal Life just as a permanent form of life insurance is excellent and costs less.
Who needs to buy Universal Life Insurance?
The best candidates for Universal Life insurance would be young people that would 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 maximum time limit for low cost Term life insurance. He would normally need life insurance far past the age of only 55 years. The other type of consumer who would benefit from Universal Life would be simply the individual wanting life insurance for the rest of his life. Many people want their life insurance to protect there family members for their complete lifespan and not ever terminate. Protective Life and Banner Life have some great Universal Life products, check out these reviews.
Whole Life vs. Universal Life Insurance
In the world of permanent life insurance, we have to major types. They would be Whole Life insurance and Universal Life. Trying to explain the difference between the two can be a little confusing because they are somewhat similar. Both of these products are permanent forms of life insurance that pay a death benefit to your beneficiary. Both can offer a cash value but where do they go from there? Whole Life insurance does not offer flexible premiums but does offer a greater platform for generating a cash value. On todays standards, most people are more concerned about the life insurance protection than cash build-ups. That is what life insurance is all about, a death benefit upon the demise of the insured, plain and simple.
Many consumers purchase Term life insurance and don’t even consider permanent plan designs.
When most consumers decide to purchase life insurance, they never consider anything else. Many times this is because they do not have knowledge of the other life insurance forms. This can lead to trouble if they need life insurance for the rest of their lives and they just purchased a 20 year term policy as an example. The negative side of this mentality is realizing many years later that they still need life insurance but it is too late.
It can be too late because their health has changed and they no longer would be able to purchase life insurance. Just one serious medical condition can create a life insurance purchasing nightmare. Also, at an older age they might not be able to afford a new life insurance policy. These two scenarios happen on a daily basis to people that failed to design a good life insurance portfolio. Sometimes it is also their agents fault for not properly guiding them.
Combining Term life insurance with Universal Life
This is what I consider to be the best of both worlds by far. An individual does not have to make a choice of which plan design to buy. Having a combination of the two is a fantastic choice and the best of both worlds. Low cost Term life insurance can be used to cover the most financially volatile times in a persons life. We use over 40 trusted life insurance companies when quoting Universal Life or Term Insurance.
The Universal Life insurance policy can be used to continue on after the Term expires. Usually a much smaller face amount can be used for the Universal Life. This gives the individual life insurance protection for life and the money saving feature of using Term for the largest face amount. Feel free to use our face amount calculator to help you choose the most logical death benefit.
If you are a little confused about Universal Life, no worries. Call us and get your questions answered over the phone.
Shopping for Universal life insurance can seem confusing with all the choices you have between the different companies. There are a lot of variables to stop and consider and we can explain how these excellent plans work. Contact us today and we will answer all your questions over the phone, we’re here to help you.
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