What Is Universal Life Insurance?
Universal life insurance is a popular choice for many people who want lifelong insurance coverage, mainly because you can choose how much money you put into the policy, up to a certain point. The flexibility of a universal life insurance policy makes it a popular choice, though it may not actually be the best choice for you.
A UL’s flexibility is both its strong suit and its potential pitfall, which means you’ll probably want to seek out the advice and knowledge of an independent insurance agent before deciding which type of permanent policy is best for you.
What Is Life Insurance?
life insurance is a type of permanent life insurance, which means it stays in effect for your entire life and builds a cash value component.
It differs from other types of permanent life insurance options, such as whole life insurance, by giving you the flexibility to adjust certain aspects of your policy. The two parts of your policy that you can change are the death benefit and your premium.
Your UL’s premium will have a minimum payment that’s required to keep the policy active. You can choose to pay this amount, or you can choose to pay a higher amount. The extra money you pay goes directly into your cash value, allowing it to grow at a faster rate than simply paying the minimums.
As your policy grows, your cash value might reach a point where it can pay for your premiums, but once your cash value runs out, your policy will lapse.
You can also adjust your death benefit within a specified amount. Lowering your death benefit can help lower your premium payments.
If you pull out some of your cash value and never “repay” that amount into your policy, then your death benefit will be reduced by the same amount that you took out.