Universal Life  Insurance          

Universal life  has flexible premiums, adjustable death benefits, and earns high rates of interest on it's policy cash values.  Universal life insurance is insurance that has both an insurance component and a savings component. It provides life insurance protection for your family in the event that you suffer an untimely demise, but it also accumulates a cash value over time based upon current money market conditions.  The amount of this cash value is sensitive to the market rates for money deposits such as the "prime interest rate".  In times of high interest earnings these policies can do quite well.  This type of policy generally will pay a few points over prime to attract the investor to put and leave their money in it.  The track record on these plans is really quite good, even in time of low interest earning such as now.   This cash value can be borrowed temporarily or surrendered and sent to you as a check.  There is no reason needed, no delay to get, and no taxes to pay in most situations.  Even the death benefit is income tax free.

You pay a premium that normally is not fixed, but can change along with your financial picture.  You can choose to pay more in premiums when your income is high and less or no premium during years that are lean, or when kids are going to college.  No reason is necessary.    As long as policy values cover death benefit expenses you may lower, raise or suspend premiums.   Part of the premium is used to pay for the insurance coverage you have purchased. The remaining part of the premium goes toward the investment reserve savings. This savings portion of the policy is invested and will generally provide a better rate of return than a typical bank savings account or certificates of deposit. What's more, the cash value of your policy can be accessed if you need money.

Who should consider Universal life insurance?
People with long-term needs for life insurance or long term funding needs such as education & retirement.
People whose needs will change and want an insurance policy that can change with them.  Universal life insurance is well suited to cover long-term needs, because coverage continues for the rest of your life. You won't need to renew your policy periodically, nor will you need to provide proof of insurability once the policy is in place. Some cash value insurance also allows you to lock in a premium schedule, so you won't have to worry about the rising costs of insurance as you get older or your health deteriorates.

Advantages of Universal life insurance

Life insurance protection
Universal life  has flexible premiums, adjustable death benefits, and earns high rates of interest on it's policy cash values.  As with any life insurance policy, one of the main strengths of cash value insurance is that it can provide adequate financial resources for your surviving loved ones in the event of your premature death. Knowing that this protection is in place allows you to sleep a little easier at night.

Lets you make money on your money
In addition to life insurance protection, cash value insurance can give you a return on your money (assuming that sound investment choices are made for the cash value portion of the policy). Insurance that lacks the cash value feature, such as term insurance, doesn't offer such investment opportunities.

Cash value grows tax-deferred
A cash value policy is similar to an annuity in this respect. All the interest and earnings on the policy's investments are allowed to grow free of income taxes until you surrender the policy or begin to withdraw your funds. Depending on investment performance, this "tax shelter" can enable you to accumulate a substantial nest egg in your cash value policy over a period of years.

Allows withdrawals from cash value
Depending on your insurance company and the exact type of policy you have, you may be able to withdraw a portion of the cash value in your policy. A withdrawal from a cash value policy is similar to a withdrawal from a bank savings account and almost as easy to make. As long as you maintain enough cash value in the policy, you can make withdrawals and still keep the life insurance protection in effect at your desired coverage level. What's more, policy withdrawals may be tax-free up to your basis in the policy (the amount you have paid into the policy in premiums). As long as the policy fits the IRS definition of insurance, only the earnings will be taxed upon withdrawal.

Allows loans against cash value, or surrenders to obtain the money in the policy.
You can also take loans against your policy using the accumulated cash value as collateral. The interest rate is determined in advance and is often lower than the rates banks offer. If you die before the loan is repaid, however, the death benefit proceeds will generally be reduced by the amount of the outstanding balance.  It is common for an insurance company to allow you to borrow the money within certain parameters at -0- interest!

Disadvantages of Universal Life insurance

Premiums are flexible.   A person may not be disciplined to put substantial enough deposits into it to keep it afloat in low premium low interest earning time.   Premium can be much higher than term life premiums........or be made identical to level term insurance premiums   However since part of the goal is to build up substantial cash value, it's inventors did  not design it on purpose to compete with term insurance/
The premiums for this life insurance is usually quite a bit more expensive than for a comparable amount of term insurance. The reason is that  you are paying for both insurance and the savings component of the policy. With a term life policy, you are simply paying for death benefits.

What can you use Universal Life  insurance for?
Like any life insurance policy, the primary purpose of cash value insurance should be to provide life insurance protection for your family. Beyond that, cash value insurance can be put to other uses because of its unique savings element. You can, in fact, use it much as you would use your other investments. The tax-deferred growth of your cash value makes this type of insurance a good way to save for major financial goals such as retirement, starting a business, and funding your children's education, even paying off your home mortgage much earlier than normal.