What is Universal Life Insurance?
With a Universal Life Insurance policy, premium payments, cash value, and death benefits are flexible.
Reasons to consider universal life insurance
Is a universal life insurance policy right for you?
- Does permanent, lifetime protection meet your needs?
- Is the availability of tax-deferred cash value over time important to you?
- Will you need to use your cash value to offset your premium in the future?
Answering “yes” to these questions means a Universal Life Insurance Policy will suit your needs! However, there is more than one type of Universal Life Insurance Policy.
Which type of universal life insurance fits your needs?
There’s more than one type of Universal Life Insurance, and it’s important to understand all policies that are available to you. If you have questions, the National Educational Services financial advisors can help you determine which policy best fits your individual needs.
Indexed universal life insurance
Universal life = openness and flexibility
Universal life is a type of permanent life insurance that provides a death benefit and a cash value account. With this type of policy, the policyholder has no say about how the cash value account is invested. The major benefit of this type of policy is its flexibility in terms of paying your premium.
A universal life insurance policy will typically offer general premium guidelines when it comes to premium payments. However, you can decide how much and when you pay your premiums (of course, falling within the guidelines). The cost of your premium will directly affect your cash value and, potentially, your death benefit. If your circumstances change, universal life insurance policies also have flexibility in your death benefit. You can always change your death benefit amount. If you decide to raise the benefit, you’ll be subject to the entire insurability process and higher premiums.
Universal life policies offer transparency when it comes to the policies’ cost structure.
Other insurance policies don’t offer this information.
With a universal life insurance policy, you can add the cash value to your death benefit. This means that if you die with a $500,000 death benefit and $100,000 in cash value, you can add the cash value to the death benefit, and your beneficiary will receive $600,000. This increased benefit will impact premium calculations, and your premium will be higher.
Index universal life is a type of universal life insurance that credits interest based on the performance of an equity index, such as the S&P 500.
Life insurance FAQs
Life insurance can be confusing. Find answers to the most frequently asked questions.
The policy owner is the person who owns the life insurance policy. In many cases, the policy owner is also the person who is insured by the policy. However, the policy owner may also be a relative of the insured, a trust, partnership, or a corporation.
A beneficiary is the person(s) selected by the policy owner to receive the life insurance payments upon the death of the insured.
Premiums are the payments made to the insurance company to purchase and keep a policy active.
A death benefit is the amount paid to the beneficiary at the time of the death of the insured.
The face amount of the policy is the amount of the death benefit as stated in the policy. This does not include additional amounts that the policy may provide.
Insurability refers to how likely an applicant is to be offered coverage based on current health, medical background, family history and other factors.
When determining this the main factor to consider is the period of time you’ll need coverage, especially if you have children. If your children are young, twenty or thirty years of term life coverage would help your children get through college or secure their future. If your children are older and able to support themselves, you might consider a shorter term period that’s more appropriate for your needs.
Generally, the benefits received by beneficiaries after death are collected tax free. If you have a permanent life insurance policy, the funds accumulated over time would not be subject to income tax as long as the policy is still in effect. Finally, while withdrawals and loans reduce the value and death benefit, most are not taxable.
When choosing a life insurance company be sure they have exceptional customer service, competitive pricing, great claims payment history, as well as being financially sound. To learn more about company ratings online visit Standard and Poor’s, Moody’s, Fitch and Weiss.
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