You probably already heard about the universal life insurance either by a friend, an agent, or an advisor. Simply put, a universal life insurance is a kind of life insurance policy that provides you not only with flexibility as well as with cash value accumulation.
Among the reasons why people choose to buy a universal life insurance policy are to make an addition to their retirement portfolio, to serve as a permanent coverage, or as a business agreement funding.
Universal Life Insurance Pros
1 Permanent Protection:
With this policy, you will get a lifetime coverage Depending on your specific policy, the plan can be available until you reach 100 years old or even more.
When you have a universal life insurance policy, the insurance company will provide you with a lot of details. From the policy expenses to the cash value accumulation, and from the interest-earning to mortality charges.
With this kind of policy, you have the flexibility in what concerns with premium payments as well as with the death benefit. At any given time, you can decide to increase or reduce the amount of coverage.
4 Skip Or Adjust Payment:
This is another kind of flexibility that the universal life insurance allows you to have. You may simply skip or adjust the monthly premium using the cash value accumulation.
5 Double Death Benefit Options:
Unlike most life insurance policies that only pay out the death benefit, the universal life insurance will not only provide you with the death benefit as you may also get the accumulated cash value. Usually, there are two different options regarding the death benefit payout.
You can have the universal life insurance that will only give you a fixed death benefit payout (that usually is the amount of coverage) or you can have the universal life insurance paying you the death benefit plus any cash value accumulation that might exist. Despite this second option is usually more expensive, it’s one of the main benefits of this kind of policy.
6 Tax Deferred Earning:
One of the best advantages of this policy is the fact that the cash value accumulated is usually tax-free. If you want to make sure that it is, just make a withdrawal via a loan, for example.
7 Cash Value Accumulation:
This is one of the best additions of the universal life insurance. A part of your monthly premium is used to make some investments, that earn interests. These will accumulate and in case you need to use it, you can actually are allowed to. For either an emergency situation, your child’s education, or simply to skip a monthly payment.
Universal Life Insurance Cons
These fees will come out of your premium are include the managing fees, managing your cash value, mortality cost, and agent commissions, and they are usually high.
A universal life insurance policy is a lot more expensive than a simple life insurance. After all, it also includes the cash value accumulation.
While for some people who already maximized their Roth IRA’s and 401k and are just looking for a tax-free investment, a universal life insurance can be a good option. However, if this is not the case, you need to do the math. The fees of this kind of insurance are pretty high and you don’t have a way to control the investments that are made by the insurance company.
You may well invest the monthly premiums you were supposed to pay (plus the fees) in bonds, stocks, mutual funds, among others, and be able to get a better return.