5 Tips when Considering Universal Life Insurance

Universal life insurance is one of the most popular life insurance plans on the market. Universal life gives people an option besides whole life that provides permanent coverage. It is not a term policy and it has similar benefits to whole life. However, it is a little more flexible overall. If you are considering a universal life insurance policy, here are a few tips to consider.

1. Can Outperform Whole Life

Both whole life insurance and universal life insurance gain interest on their cash value as they go. However, universal life insurance has the capability to outperform whole life. The insurance company decides what the interest rate will be tied to and many times, it is better than the rate that is offered with whole life. Therefore, if you are looking at life insurance from an investment perspective, universal might be your better option. 

2. Flexible Death Benefit

Unlike other forms of life insurance, the death benefit of universal life insurance is flexible. If you want to increase the death benefit, you can do so without having to cancel your current policy and get a new one. You can also decrease the policy if you want. This gives universal life superior flexibility when compared to whole life. 

3. Flexible Payment Schedule

Most life insurance policies have a fixed premium payment that is due on a fixed interval. Universal life insurance offers a flexible premium program. Depending on the cash value, you can determine how much you want to pay each period. For example, if the interest has done well during the last period in your account, you can cut back a little bit on the premium if you want. If your interest doesn't do well, you may decide to pay a little extra one time. This option allows policy holders a great deal of flexibility in their financial decisions. 

4. Transparent Funds

One key difference between whole life insurance and universal life insurance is in the way the premiums are diverged to their clients. When you have a whole life insurance policy, you make your premium payment and the insurance company does what they want with the money. You have no idea what percentage is going towards overhead, which percentage goes towards the death benefit, and which percentage goes towards the cash value. With universal life insurance, this is not the case. They disclose everything that they are doing with your money. You will get a detailed breakdown of exactly how much the insurance company is keeping and how much goes to the other parts of the policy. If you like to know where your money is going and have a more "hands on" approach, universal life is for you.

5. Death Benefits Lapse

With universal life, maintaining the death benefit can be up to the insurer. If they fall behind on their premium payments and the cash value starts to decrease, they can actually lose their death benefits. With whole life, you are guaranteed the death benefit as long as you make your premium. This is not always the case with universal life. 

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