Universal Life Insurance
Universal Life insurance is probably the most flexible form of life insurance product that has ever been developed. It came into the marketplace in the mid 80’s. Since its original inception, there have been a number of refinements, and today the product has flexibility plus.
The Benefit Guys would like to explain how it works and how it can work for you.
The original concept of life insurance was to pay a fixed amount of benefit when you died. In other words, you were covered for life. Over the years, products developed for specific jobs and products like term insurance and mortgage insurance were developed. To keep it simple, the insurance companies collected premiums and invested them into a “pool”, and when a member of that pool, a policyholder, died, there was enough money to pay a death benefit to someone.
As people age, the cost of life insurance increases. In order for companies to charge a “level cost”, the extra money that the company collected in the early years of a person’s life was put into reserves. This “cash value” was often mistakenly referred to as an investment. Because the “investment return” was always very conservative, many investor types talked, ”buy term insurance and invest the difference” in something else. The insurance industry developed universal life to accomplish that very goal.
Universal life insurance policies are basically insurance products that have a pure insurance element as one part, consisting of one year term insurance costs, and an investment element next to it. One premium is deposited and any surplus to the cost of one year term insurance is invested to help offset future insurance costs. This investment reserve is kept separate from the insurance and is always accessible by the policyholder. There are many different applications to the understanding of how this may apply to your situation. For specific answers or a quote, complete the Client Data page and one of The Benefit Guys will get back to you by your chosen method of contact.
With a universal life plan, you in essence are buying one year term insurance, which is the least expensive type of insurance available. There is a reserve fund established that you can deposit extra money into. A calculation is made, to advise you how much to put in on a level premium basis, to keep your coverage constant until you die. The extra money is invested in an investment option of your choice. When you die, any additional money in your investment fund is paid out tax free, in addition to your death benefit. The benefits of this are too difficult to describe in a short note like this.
As you age and family financial responsibilities lessen, you can reduce the amount of life insurance if your needs have been reduced, and you will pay less for your insurance. Your investment will grow. Should your need for more insurance occur, as long as you meet the health requirements, you can increase your coverage, and even use some of your investment portion to pay the increased cost and nothing comes out of your pocket at the time.
Dare say that universal life probably offers the most flexibility for insurance planning. If you haven’t considered this type of insurance product, you should.