Universal Life Plans

How Does Universal Life Insurance Work?

Universal life insurance is a type of permanent life insurance. The life insurance is in effect for the rest of your life. This is unlike term life insurance, which is meant for a specific period, such as 20 years. In fact, the only way for the policy to run out is if the premiums aren’t paid.

Some forms of universal life insurance also offer a cash value component. You can take money out of cash value via a withdrawal or loan. When you die, the insurance company will reduce the death benefit payout to your beneficiaries by the amount of any withdrawals or outstanding loans.

If you’re looking for the lowest risk guaranteed universal life is the best choice, while variable universal life has the most risk because the cash value is tied to stocks and bonds.

Guaranteed Universal Life Insurance
A guaranteed universal life insurance policy offers a death benefit and premium payments that will not change over time.

You select an age at which the policy ends. The higher the age you choose the higher the premium.

These policies generally have little or no cash value and are typically the cheapest kind of universal life insurance you can buy. You’re paying for the lifelong coverage, not the cash value you see with a whole life policy.

These policies are sometimes called “no lapse guarantee universal life insurance.” This is to address recent problems in which traditional, non-guaranteed universal life insurance policies lapsed because the cash value couldn’t cover the policy’s expenses and the cost of insurance.

These newer no-lapse policies promise to stay in force. But there’s a catch: If you make a late payment or miss one, the policy will likely terminate. Since there’s usually no cash value, there won’t be any money to take away. The insurance company will keep the premiums you paid.

Who may benefit from a guaranteed universal life insurance policy?
Guaranteed universal insurance can be a good choice for someone looking primarily for lifelong coverage versus the “investment” component of cash value found in the other types of universal life policies.

Want to find out more about available Universal Life Insurance Plans? Call or use our online contact form to request an in-home appointment to get your questions answered.