What is Universal Life Insurance?
Learn in detail exactly what universal life insurance is, how different kinds of universal life insurance policies work, and find the best universal life insurance policy for you.
Let’s understand first what universal life insurance is and how different kinds of universal life insurance work. Then, we will discuss what kind of policy you should consider for your permanent life insurance needs.
Universal life insurance policies are a hybrid life 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 the death benefit and cash value accumulation into two 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.
There are four kinds of universal life insurance policies:
(1) Traditional or Non-Guaranteed Universal Life
Universal life insurance was developed out of whole life insurance and is similar to whole life insurance in certain ways. However, there are a few differences. Universal life insurance 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 lowest allowable premium only, rather than the insurance companies’ guideline premium. Because traditional universal life is a non-guaranteed product, it can end up costing you fortune (in the form of not having life insurance when you need it most, as well as income tax consequences of cancelling your policy, such as phantom income tax) if your policy is dropped (lapsed or cancelled) because of not having sufficient cash value or lack of further higher premiums. This is a very tricky and delicate policy, and in most cases it ends up lapsing and costing you a lot of money. If you own a traditional or non-guaranteed universal plan, please call (877) 972-3262 now to explore your options for converting to a guaranteed universal life insurance plan. Or, complete an online life insurance quote request to get a free review of your current policy by one of our highly trained and expert life insurance specialists now.
(2) New Guaranteed Universal Life
This is pretty much like a traditional or non-guaranteed universal life policy except your premium is guaranteed never to increase, and as long as that guaranteed premium is paid on time, your death benefit will always be always in force. Guaranteed universal life insurance is a fairly recent invention, and it is popular, because it functions as your lifelong term policy or term policy without expiration and with fixed premiums. This is a great universal life policy for anybody who is 50-plus years old and looking for life insurance for the rest of life with minimum fixed premiums. This policy can be used for estate tax liquidity, final expenses, a legacy for the next generation, or any other permanent life insurance need. Please complete an online life insurance quote request now.
(3) Indexed Universal Life
Think of this as non-guaranteed universal life with an option to tie your return to a major stock market index like the S&P 500 (or some other domestic/international stock market indexes). Interest crediting goes up and down in lockstep with the index. Indexed or equity indexed universal life policies have similar drawbacks to non-guaranteed universal life. In most cases, these policies come with very high expenses and the risk that the policy will lapse when you need it most. If you want the guaranteed death benefit then your premium will cost prohibitive. In either case life insurance companies will let you win in this equity indexed universal life insurance policy. Please complete an online life insurance quote request to discuss this kind of policy with our very knowledgeable specialists now.
(4) Variable Universal Life
Finally, this variable universal life insurance is also very similar to non-guaranteed and indexed universal life. In this policy you can invest in the stock market (mainly various kind of mutual funds) directly rather than just to tie to a stock market index. The investment inside the variable universal life insurance policy is called separate accounts. You can invest and manage variety of mutual funds inside the policy, and the performance of a VUL policy will depend on the performance of these mutual funds. The variable universal life insurance (VUL) policy has all the drawbacks of indexed and non-guaranteed universal life insurance policies. We at BeamaLife receive regular call so people who have bought this policy when stock market was on top and now lost everything in their policy and required to pay premium again this policy. We feel that this policy is ticking time bomb or VIOXX drug of life insurance world. Only way you can win with this policy is if you die sooner and your policy is still in force. If you own either non-guaranteed universal, indexed (or equity indexed) universal life, or variable universal life (VUL) insurance, you should inspect your policy documents and consult with a experienced life insurance specialist at BeamaLife. Call us at (877) 972-3262 now. Also, please complete an online life insurance quote request to get a free review of your current policy now. We suggest you do not overlook this policy and review as soon as possible. You can learn more by reading this article: If You have a Variable Universal Life Insurance Policy…..You Must Read This!
