Universal Life Insurance

Key Benefits of Universal Life Insurance

  • These are very versatile policies! They build cash value and have a guaranteed rate of growth just as a whole life policy does.  Current rates of growth in 2009 are between 3.25% and 6%guaranteed.  This is fantastic news because even CD's or other safe investments are not making half that. 
  • Pay close attention to the minimum and max funding capability in your policy for the first 7 years.  You can double up on premiums, hence over-fund these policies initially but as long as you don't hit that max installation margin, you are safe.
  • If you put only the minimum premium into this policy, the cash value growth as you get older will not sustain the policy.  Keep in mind that the insurance is always increased annually at your current age and a premium increase or  $20 to $100 more a month at the age of 50 or higher, could take you by surprise.  
  • The cash value growth in a Universal Life Policy is a wonderful idea if you are a fiscally responsible person.  It allows you to skip premiums, take out loans against the policy or change you monthly contribution at will.  This is the difference between whole life and universal.  You can miss a payment with a UL policy  because and that premium is taken out of your cash value growth to pay for the policy.  If you miss a premium with a Whole life policy, it is gone! The cash value in a whole life is not used to fund the policy, it is used to adjust for your age annually and  keep you premium steady at the same time, a fail safe mechanism if you will.
  • Universal Life has an option "B" which allows your beneficiaries to receive not only the face value of the policy, but also the cash value in that policy.  This option is an added expense but could be worth it if you have the ability to fund that policy gratuitously.  

 

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