- Universal life insurance is an adjustable policy as you can increase or decrease your premium payments, unlike whole life insurance.
- Universal life insurance is permanent as long as the premiums are paid.
- A Universal life insurance policy has a saving feature or a cash value attached to it.
Normally insurance policy plans do not offer additional features for the one who is issuing it. The plans do not have a saving or an interest option that plans. A very good alternative to an insurance plan is to build up an investment portfolio where you can liquidate at any time and letting the money grow by itself bit that requires a lot of time and patience and you have to know what you are doing. An Insurance plan is a safer option but it may not offer the ability to let the money grow or get interest. Insurance companies have come up with a plan where the policy had some sort of a cash value unlike a whole life policy and offers various features the claimant of the policy has some liquidity options. This is where Universal Life Insurance plans come in.
Universal Life Insurance:
- Universal life insurance is an adjustable policy as you can increase or decrease your premium payments according to your situation, health, or employment, unlike whole life insurance.
- Universal life insurance is permanent as long as the premiums are paid and all additions requirements are fulfilled.
- A Universal life insurance policy has a saving feature or a cash value attached to it. This means that unlike other policies, whenever a premium is paid, a portion of it is going into an investment portfolio that is very high risk in nature but also is high reward.
- You can also withdraw money from the cash value of the policy.
- You can also loan against the cash value of the policy.
- The death benefits are also adjustable, subject to a medical exam, and adjustment of premiums.
- In case of what your situation may afford, you can also divert the cash value to be used as further premium payments subjected to if your provider allows it.
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Advantages of Universal life insurance policy:
A universal life insurance policy is a very good policy to consider with some of the following advantages
Universal Life insurance policy offers lifelong protection provided the premiums are paid.
The premiums on Universal life insurance is very adjustable. Your adjustability can vary from adjusting the premiums to adjusting the death benefits. You can higher or lower your premium payments depending on your situation. You can also adjust your death benefit that is paid to your beneficiaries. Increasing your death benefit would subject you to a medical exam and higher premiums costs down the line.
You can earn interest on the cash value of your policy as a portion of your payment goes to it. It is then invested in bank accounts and investment portfolios which are high risk in nature but are also generally high reward as well. The market does go up and down but some companies do offer some sort of a minimum performance guarantee on it.
If one day you decide that you no longer need an insurance policy then you can also cash out your cash value. You will have to pay a surrender fee but after that, the money is yours to do as you like.
Remember, the cash value aspect? Well, this cash value can also be used as collateral to loan against. This means failing to pay back the loan and you forfeit the cash value of your policy.
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Disadvantages of Universal Life Insurance policy:
The day a policy that fully favors the consumer hits the insurance market is the day when unicorns will be the rulers of the world. Insurance companies are here to make money in the long run so there are some disadvantages to this as well.
That cash value, cash out, investment portfolio doesn’t come cheap. So Universal plans usually very higher premiums than normal term life insurance policies. If you have the time and patience and risk tolerability, a suggestion would be to get a term life insurance policy and create an investment portfolio of your own.
You are finally content with your life and you have built up significant assets to the point where you no longer need life insurance to take care of your beneficiaries. You want to take out your cash value for whatever reason. Fine, take it, cash out but before that, you will have to pay surrender charges which depends on how long you had it. Also, you will no longer be covered, but you know that already.
You signed up for a universal life insurance policy after doing your due diligence. The rates were attractive and affordable. Well, the rates are adjustable, not only by you but also by your provider as they are reset them quarterly. And all of a sudden you are paying for something you no longer can afford, so uncertainty is definitely in the equation.
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Now as I have laid the cards in front of you should you choose to fork out every month for Universal life insurance? Well, that depends mostly on you.
- If you can pay the premiums to the final payment, the policy covers you no matter how old you become. Your death benefit is paid out whenever you die.
- If you want to save money for a long time but you do not have the discipline to do it yourself and you will not be tapping into that income for a very long time then this insurance plan is for you.
All investment strategies and investments involve the risk of loss. Nothing contained in this website should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
Also, this piece should not be taken as advice to buy or not buy any plan but an informative effort.
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