What is: Universal Life Insurance

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance that offers flexibility in premium payments and death benefits. It combines the benefits of term life insurance with a savings component that earns interest over time. Policyholders have the option to adjust their premiums and death benefits as their financial needs change.

How Does Universal Life Insurance Work?

Universal life insurance policies have a cash value component that grows over time. Policyholders can use this cash value to pay premiums, take out loans, or make withdrawals. The policy’s death benefit is paid out to the beneficiaries upon the policyholder’s death, providing financial security for loved ones.

Types of Universal Life Insurance

There are two main types of universal life insurance: fixed universal life insurance and indexed universal life insurance. Fixed universal life insurance offers a fixed interest rate on the cash value component, while indexed universal life insurance allows policyholders to earn interest based on the performance of a stock market index.

Benefits of Universal Life Insurance

Universal life insurance provides lifelong coverage and the flexibility to adjust premiums and death benefits. Policyholders can also access the cash value component for financial needs such as education expenses, medical bills, or retirement income. Additionally, universal life insurance offers tax-deferred growth on the cash value.

Considerations for Universal Life Insurance

While universal life insurance offers flexibility and cash value growth, policyholders should be aware of potential risks. If the cash value component does not earn enough interest to cover premiums, policyholders may need to increase their payments or risk policy lapse. It’s important to review the policy regularly to ensure it meets financial goals.

Is Universal Life Insurance Right for You?

Universal life insurance may be a suitable option for individuals seeking lifelong coverage with flexibility in premium payments and death benefits. It can provide financial security for loved ones and access to cash value for various needs. Consider speaking with a financial advisor to determine if universal life insurance aligns with your financial goals.