Universal Life Insurance

Universal Insurance Policies 101: Make them work to your benefit

Universal insurance policies are very flexible for the policyholder. When you own a universal policy, you have the ability to make changes to the policy, whereas, other life insurance policies prevent you from making changes. The policy also affords you the benefit of variable rates; you can easily change your rate, so that the policy meets your budget.

Another great feature universal life policies provide policyholders is the ability to change the death benefit. There are a number of reasons policyholders desire to change the benefit and a universal life policy adapts to your needs very easily. Additionally, your universal life policy allows you to build cash value without the policy expiring.

The Benefits of Owning a Universal Life Policy

The flexibility built into a universal life policy makes it attractive. With so much control over your policy, you can determine just how much insurance is right for you and your family. Based on the amount of insurance you select, the insurance company will determine how much your monthly rate will be for your policy. This process makes owning insurance more affordable.

Understanding Your Universal Life Insurance Rates

During the course of your life you may have several events happen that will ultimately affect your universal life insurance policy. For instance, you may retire, which means you have less discretionary income. With a reduction in your income, you don’t have to change your life insurance policy if you own a universal insurance policy. You can simply adjust the rate you pay so that you don’t lose your coverage. If you would like to make larger payments to ensure the cash value is growing, or, something happens that forces you to skip a payment, you don’t have to worry about losing your insurance when you have universal life insurance.

Unlike other life insurance policies, you set the amount of the death benefit you want your beneficiaries to have. Once you set the death benefit, the insurance company will calculate your monthly payments. This process works best because you can ensure that you have a life insurance policy that you can afford. As mentioned earlier, if you want to change the rates you chose for your universal life insurance policy, you can do so at any time. You are not locked into the initial rate or death benefit you selected when you got the policy.

The Cash Value Account within Your Universal Life Insurance Policy

A great feature included in a universal life insurance policy is the cash value account. The money in your cash value account grows tax-free. You can withdraw the money based on having a qualifying event such as:

• Canceling the policy allows you access to the cash value called the cash surrender value.
• You can borrow from the cash account and make payments to replenish the account.
• Making premium payments with your cash value will not impact that status of your policy.
• You can invest the money in your cash value for your retirement.

Some Disadvantages to Your Universal Life Insurance Policy

Your insurance company can’t guarantee you that you will make a certain return on your money in your cash value account. Like any other investment, the growth depends on the market. However, in a whole life insurance policy, your insurance company can guarantee earnings.

Even though you can set your own premiums, you must make sure that your premiums cover an established threshold. Your insurance company will tell you what the target premium is, and you must make payments above this rate. Additionally, before you can change your premiums, you must have enough cash value in your account to cover the expenses you incur during the process.

Universal life insurance allows policyholders to change the rate of the premiums when their income decreases, but that may not make the policy affordable. If you find that changing the premium of your policy still puts the policy out of your budget, you can get a term life insurance quote to find an affordable insurance policy that will work for you. Term life insurance policies are the least expensive polices because they expire, but with proper planning and a balanced financial plan, you will have the peace of mind knowing that you have insurance coverage if something happens to you.