Universal Life Insurance
Universal Life Insurance?
A comprehensive permanent life insurance contract that lasts for your entire life. Provided that the payments are paid, coverage will never end and benefits are guaranteed to be paid to the insured’s beneficiary. The “cash value” of the plan is also very flexible, and terms can also be changed, such as the payout structure or beneficiary.
The flexibility of the cash account is a major selling point. The money can also be invested in the money market fund, in stocks, bonds, etc. This allows for greater flexibility and more financial freedom for both policyholder and beneficiary.
Another huge benefit to Universal Life Insurance is the payout could be used to defray the cost of the premium past a proscribed point. This allows for a responsible, stable investment with little risk involved.
In this case, some of the premium payments go to funding the savings element and the death payout. For the coverage to remain active, payments may be made either through the premium payments or through reduction in the cash value of the policy.
Why Universal Life Insurance?
Universal Life Insurance is great for large estate planning, especially if and when tax-free retirement accounts become maxed out. It is a relatively risk-free way to ensure future cash flow for the beneficiary.
The Way In Which The Death Benefit Really Works
There are two types of death benefits: Level and Increasing. With a Level benefit, payout remains the same over time. Alongside an increasing benefit, payout increases over time.
The best option for you varies on your situation and is better talked about with a Coach B. agent.
Exactly which will be better? Well, that will depend on ones end goals. That’s a concern which will be best talked about with a licensed insurance professional, such as a Coach B. Agent.
How Cash Value Works in Universal Life Insurance Policy
Universal Life Insurance is permanent, which means the beneficiary is guaranteed some type of payout. The accumulating cash value will increase by a certain minimum percentage, usually 1-4%, and can increase beyond that based on stipulations in the contract and how the insurance carrier performs on an annual basis.
It is always possible to utilize that cash value of the policy, either by borrowing against it (like a loan), or by withdrawing from it. Borrowing against it won’t be hit with taxes, but withdrawals will on a annual basis.
Comparing Universal Life Rates
By way of the example in the table to the right, one could notice that not every one of the companies are competitive in their rates when it comes to life insurance. Although Sagicor and Banner Life (both very good companies) are quite close to American National, State Farm’s insurance policy is actually two times as expensive to have the exact same basic coverage. Therefore this is the reason why we highly encourage one to talk to an independent broker who deals with dozens of companies that will help find you the very best price, such as a Coach B. agent, instead of buying life insurance from somebody who works for just one company.
Term Life vs Universal Life
Universal Life Insurance
vs. Term Life Insurance
Universal life insurance, basically a “hybrid” product of permanent life insurance and term life insurance. The biggest difference is that term life insurance will end after the proscribed period of time, after which the plan will not payout. With Universal Life Insurance, there Is guaranteed to be a payout.
Since Universal Life Insurance is guaranteed to pay out, the premiums will be higher than term insurance.
Universal Life Insurance vs. Whole Life Insurance
The big difference here is in the cash value and payout. Whole life will only ever be paid out following the end of the policy (by way of the death of the policy holder). Universal Life Insurance has a flexible cash value and can be drawn upon throughout its term.
Both kinds of insurance coverage permit for the tax deferment involving your current cash account as well as provide for the chance of borrowing against the cash value in the policy. Having said that, whole life insurance does’nt allow for increase or decrease in payout. Though most policy types allow for skipping premiums provided certain circumstances are met, whole life will require that these be paid off in order to continue coverage, whereas Universal Life will simply use premium skipping to defray the eventual payout amount.
Interest accumulation is different as well. Universal Life policies adjust interest continually, whereas whole life adjusts them annualy.
Universal Life Insurance Offers:
- An actual cash value element which permits you to miss premium payments because long as you have enough funds built in place to cover the cost of insurance premiums. Indeed there might be a initial period — for example, your first year — during that you are not able to access this component of the insurance policy.
- The potential to increase and decrease the policy death benefits, as needed, based primarily upon your current conditions.
- One’s capability to be able to borrow against the cash value (in many instances).
Whole Life Insurance Offers:
- Ones possibility concerning the cash value element of the plan to improve on a tax-deferred basis (as well as universal life). Many whole life plans allow for distributions and loans.
- A locked-in death benefit that might not really increase or decrease even though the insurance policy is in force.
- The capability of skipping premium payments underneath certain situations. However the premium is subtracted from the policy’s cash value because a loan you will need to repay, usually with extra interest.