Universal life is like term life insurance with an investment attached. It is a kind of flexible policy that lets you vary your premium payments and/or adjust the face amount of your coverage. The premiums you pay (less expense charges) go into a policy with an attached investment generally consisting of a short-term money instrument yielding a modest return.
If your yearly premium payment plus the earnings on your account is less than the total charges, your account value will become lower. If it keeps dropping, eventually your coverage will end. You may need to increase your premium payments or lower your death benefits to keep the policy in force. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.
Generally, you'll have lower premiums than with whole insurance but still keep most of the same benefits. However, the cash value build-up is not guaranteed and depends heavily on the your invested premiums' performance. Basically, cheaper rates but less certainty about a cash value.
Universal life can be a very solid base for an overall protection strategy and can easily and economically be supplemented by other policies to ensure total protection. An experienced professional can assist you in constructing a strategy to bring you the security only well planned protection can bring.
Pros:
Similar to whole life insurance. More flexible premiums. Fund for younger buyers who may have fluctuations in their ability to pay.
Cons:
If the insurance company does poorly with its investments, the interest return on the cash portion of the policy will decrease. In this case, less money would be available to pay the cost of the death benefit portion of the policy.
Rates and coverage vary form state to state. Shop around on your own and talk to an independent insurance agent to make sure you get a plan that's right for you. It's amazing how much rates may vary from company to company for the same coverage. For more information and rates on life insurance visit www.grouphealthplans.com
