What is Universal Life Insurance?
Universal Life Insurance (also referred to as Flexible Premium Adjustable Life Insurance) is a kind of flexible policy that lets you vary your premium payments. You can also adjust the specified face amount of your coverage. Increases may require proof that you are eligible for a higher death benefit. The premiums you pay (less expense charges) go into a policy account that earns interest. Expense charges are deducted from the account. If your annual premium payment, including interest your account earns, is less than the charges, your account value will decrease. If it keeps decreasing, your coverage will eventually end. To prevent that, you may need to start making up premium payments, or increase your premium payments or lower your death benefit. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value. {NAIC Life Insurance Buyer’s Guide ©1997, 2007} Additionally, there are varying death benefit options to choose from.
Why Universal Life Insurance?
This type of policy is attractive to young individuals and professionals seeking a potentially lower initial premium, and insurance that helps offer protection with the option to accumulate cash value at an interest rate set by the insurer. Besides the flexibility that comes with premium payments, you can generally choose to increase or decrease the specified face amount on the policy, where whole life insurance face amounts are determined at the time of sale and are non-changeable. The payment schedule is on your terms, meaning you can make additional premium payments at any time and in the amount you choose. In addition to permanent coverage and flexibility, most universal life insurance policies come with a No Lapse Guarantee which will ensure your policy remains in force, for a specified time period, despite the cash value of the account.
