Definition of Universal Life Insurance
Universal life insurance refers to a kind of life insurance that is permanent. With universal life insurance, the person who is insured is covered for the rest of their lives as long as they pay their premiums and meet all of the other policy requirements. Like other types of permanent life insurance, universal life insurance gives you protection for your whole life and a way to save money called “cash value.” Your beneficiaries get the death benefit of the insurance when you pass away.
What Advantages Does Universal Life Insurance Offer?
In addition to providing lifetime coverage, universal life insurance has several other advantages.
You Get Interest on Your Cash Worth
The cash value of universal life insurance policies often earns interest at the same rate as the money market. Naturally, it’s crucial to keep in mind that the interest rate will change with the economy, so the interest you earn can also decrease. However, some companies provide protection against it with a policy’s minimum performance guarantee.
Borrow Money Against It or Withdraw From It
A portion of each premium payment made for universal life insurance policies goes toward paying the death benefit. Additionally, a part is used to increase its cash value. You may eventually be able to borrow against the policy’s cash value after it has collected money. Depending on the insurance provider and policy, different guidelines govern when and how you may do this. It’s important to know that this could lower your death benefit, affect your taxes, or even cause your policy to end.
Adapt the Death Benefit
The death benefit of universal life insurance policies is flexible. Some insurers allow you to increase your death benefit as long as you pass a medical exam. To lower the cost of the insurance, you might also decide to lower the death benefit. Keep in mind that increasing the death benefit of the insurance may result in higher premium payments.
Premiums are Flexible
You might not have to pay your universal life insurance premiums for a while if the cash value of the account is enough to cover the costs. This might be useful if you run out of money and are searching for methods to cut your monthly expenses. But there are also drawbacks. For example, your coverage can end if you pay enough premiums to use up all the cash value in the account.
Even though you can change your premiums, remember that if you don’t have a positive cash value, your insurance will end and you won’t be covered. Sometimes insurance providers offer a grace period, during which you have a certain length of time to make a payment to bring your policy’s cash value back up to par before coverage expires.
