What is universal life insurance?
Universal life insurance is a type of whole life insurance. Universal life differs from other whole life policies in that it allows the policy owner to vary, with limitations, the amount and timing of premium payments and the death benefit. These changes can be made while the policy is in effect.
Universal life is NOT whole life. Universal life is Annual Renewable Term plus cash value (a savings). Look at your universal life policy. First, look on the page that shows your policy number, name, coverage amount, etc. Look to see if you have option 1 or option 2 (it may be under option I and option II, or A,B)
If you have option 1 - your beneficiary only gets the FACE AMOUNT. Assume you have $100,000 of coverage and $5000 of savings. When you die, your beneficiary only gets the $100,000!
However, if you have option 2 (which usually has a higher premium) your beneficiary gets BOTH the face amount plus the cash value.
Having that knowledge, who would choose option 1? It's usually never explained. Also, if you look at the index of your policy, you can look up the definitions of Option 1 and Option 2,
With Universal Life being Annual Renewable Term (plus cash value), the cost of insurance goes up every year because the odds of dying are greater. There is a table that shows your cost of insurance per $1000 of coverage in your policy. Look at how the cost goes up EVERY YEAR.
But your premium doesn't neccessarily go up. Eventually what happens is that your monthly premium can't cover the cost of insurance, so the company will take money out of your cash value.
(Ever hear it will pay for itself?) Yet, you'll get to a point where you have no more cash value left, and the premiums are too expensive to continue the insurance.
Once again, the insurance company wins.
Universal life is neither whole life or annual renewable term. It is a distict animal all it's own. The basic premise in universal life is that the cost of insurance for younger ages can (and should) be overfunded.
This amount of overfunding is the cash value. The benefit of this strategy is that the cash value can grow at a modest market sensitive interest rate and can accumulate to a point where the internal cost of insurance can be subsidized by this cash value when the premiums are insufficient to pay for the COI.
Based on the future experience of the crediting interest rates, a reasonable approach can be taken to increase or decrease premiums as required to keep the policy in force for a specified period of time. UL cannot effectively be compared to term insurance, nor is it easy to compare to Whole Life policies.
The differences in Options 1 & 2 death benefits are associated more with the desire to view the instrument as a life insurance policy or a cash accumulation vehicle. There are many other factors that should be looked at to maximize the benefits for either situation, but that being said, they can function as either a cash accumulator or a death benefit engine economically but can not be both at the same time.
A permanent life insurance policy has three components - the death benefits (protection), the expense component and the cash value component. A universal life insurance policy will differentiate and itemize these three components, which will allow for more flexibility in the policy. The policy owner then has the facility to modify the face amount or the premium rate (under specific guidelines) to meet with changing circumstances and needs in his or her life.
Universal Life Insurance is the one type of life insurance. This is a flexible version of life insurance where you get the savings element of whole life. Universal Life Insurance policies is the combination of death benefits with a savings component or cash value that is reinvested and tax deferred.
What are the benefits of universal life insurance and what are the possible drawbacks of this type of policy?
Variable universal life insurance is not an account. It is a policy that invests in separate accounts in an attempt to earn higher returns than a fixed policy. A variable universal life insurance policy can be converted into a different type of life insurance policy but not a different kind of account.
What's special about variable universal life insurance is that it builds cash value. You can read more about this type of insurance online at the Wikipedia website. Once on the page, type "Variable universal life insurance" into the search field at the top of the page and press enter to bring up the information.
A universal life insurance policy is a cash value type of life insurance policy. With universal life insurance, you policy may build up cash values over time, similar to a whole life policy, but typically less expensive than whole life insurance. Another feature of some universal life insurance policies is called a "no lapse guarantee" With this feature, as long as you pay your premiums, the policy is guaranteed to last to age 100 and…
Universal life insurance is a modified, flexible form of whole life insurance. Part of your premium goes toward insurance coverage, while the rest is invested to increase the policy's cash value. Benefits of Universal Life Insurance: Universal life insurance is the most flexible of all life insurance plans: * It lets you choose the amount of protection you want, increasing or decreasing your coverage as your needs change. * It lets you control the amount…
Basically Perm and Term. Perm or whole life or Cash Value life can be several different types such as Single Premium Whole Life, Indexed Universal Life, Universal Life, several different variations of WL such as Interest Sensitive WL and then there are the variables. Also, the "new" term pays you all your money back in the end. Broadly there are two types of life insurance: a. Term life insurance b. Permanent life insurance Term life…
Universal is better term expires and if it does before you do-you get nothing. Different people in different circumstances need different types of insurance. Since we do not know anything about you other than that you presently have universal life insurance (or whole life, as it is more usually called) we have no basis to recommend whether you should convert it into term life or not.
Universal life insurance combines a life insurance policy with a tax deferred savings plan. These plans are offered by all major life insurance companies and the chartered banks' insurance divisions. Rates for these policies vary with age. They are expensive policies compared with traditional whole life policies, but for a person holding the policy a long time they will eventually pay more than the face value of the policy and should generate enough earnings to…
Prudential offers a variety of life insurance policies. Some of the different life insurance policies that they offer are Term Life Insurance, Universal Life Insurance, Variable Life Insurance&as well as Survivorship Life Insurance. bAlong with these different types of policies they also offer retirement planning, annuities and long term care insurance.