Posted by BeamaLife Editor on September 14, 2011 · Leave a Comment
Universal life insurance is a hybrid insurance product that combines the protection of a conventional term insurance policy with the cash value accumulation feature of a whole life policy. It’s like buying a permanent or lifelong term life policy and investing the difference in fixed income securities (like Treasury Bills, Bonds, or CDs).Unlike traditional whole life policies, universal life insurance divides death benefit and cash value accumulation into separate components. That allows the universal life insurance policy to be flexible, in that you may pay minimum premiums as long as policy expenses and the cost of insurance coverage are met. The amount of life insurance coverage can be changed, and the cash value growth will depend on the amount of premium you pay.
Traditional or non-guaranteed universal life inurance is considered an “unbundled” product, which means that mortality expenses, investment performance, and other expenses are factored in to calculate premium rates and cash values. This offers flexibility in making your premium payments, but it also works against you as most life insurance agents sell this policy at the allowable minimum premium only, rather than the insurance companies’ guideline premium.
Guaranteed universal life differs in that your premium is guaranteed never to increase, and as long as that guaranteed premium is paid on time, your death benefit will always be paid. Guaranteed universal life insurance is a fairly recent invention, and it is popular, because it functions as your entire lifelong term policy or term policy without expiration and with fixed premiums.
Indexed universal life is like a non-guaranteed
universal life with an option to tie your return to a major stock market index like the S&P 500. Interest crediting goes up and down in lockstep with the index. The expenses and risks are even greater with this product though, due to its marriage with stock market fluctuations.
Posted by BeamaLife Editor on April 25, 2011 · Leave a Comment
When life insurance is brought up in conversation, many who have a basic understanding of the industry can enumerate the differences between term life insurance and whole life insurance. However, there are newer products on the market that may suit your needs and goals better than these more traditional varieties of life insurance.
Universal life insurance is something of a fusion between a term insurance policy and a whole life policy. What this means is that a universal policy will offer the coverage of term life insurance and the cash value accumulation of whole life insurance. The difference is that those elements are truly separate. Also, you can control, within certain parameters, the amount you pay in premiums, and the frequency at which you pay them.
There are three kinds of universal life policies – traditional/non-guaranteed universal life, guaranteed universal life, and indexed universal life.
Traditional universal life insurance is considered an “unbundled” product, meaning that death expenses, investments, and other costs are factored in to calculate premium rates and cash values. Due to the variable nature of all of these elements, you cannot be guaranteed of the profits.
With guaranteed universal life insurance, you are given a promise that your premiums will not ever increase, and as long as payments are made on time, your beneficiary will receive your death payout when the time comes. This is a more recent type of life insurance product, whose popularity has grown due to its dependability and flexibility.
Lastly, there is indexed universal life insurance, which functions like a traditional universal life insurance policy, except you can tie your return to a stock market index of your choosing. Indexed universal life policies have the same sort of disadvantages as traditional universal life insurance as well – namely high expense and risk.
