Universal life (UL) insurance is a permanent life insurance, similar to whole life insurance in that way. If you pass away your beneficiaries will receive the payout. Moreover, it builds cash value that you can borrow against.
Your premium payment is comprised of three parts, insurance, administrative fees and cash value. The cash value grows over time. The amount of growth in the cash value depends upon the interest rate. Generally, UL policies have a minimum guaranteed interest rate but may pay higher rates depending upon prevailing rates.
Universal Life Is Adjustable
UL allows you to adjust the premium that you pay. You may pay more than the minimum premium up to some maximum. The excess premium would be placed in your policies cash value. You can also select to pay less than the minimum premium have your cash value makeup the difference.
Universal Life policies may also allow you to adjust your death benefit. Generally, you have the option to reduce your death benefit when needs change in your life. Additionally, you may have the option to increase your death benefit as well. There are two types of death benefit as well. Level death benefit where the benefit never changes over the term of the policy. Also, there is a second option, increasing death benefit where the payout would be the death benefit plus the cash value. The latter type of policy would include a higher premium.
Universal Life Is Flexible
Universal life (UL) insurance offers both flexible premiums and flexible death benefits. They also allow for potential growth in cash value. The downside to a universal life insurance policy is that they require close surveillance of the interest rates. This is to ensure your policy remains in tack. Furthermore, if interest rates fall, the cash value of your policy could falter.
In order to learn more about universal life policies, contact your FAPCO agent.