Readers Question:

What are the benefits of a Universal Life insurance policy? Will I have to spend much on such a plan?

Shirley

Des Moines, IA

Good question. Let’s define Universal Life insurance first: this is a special kind of Whole life or Permanent life insurance coverage that allows a policyholder more flexibility when it comes to adjusting how much you pay for premiums, and even your death benefits. It has the savings or cash value feature of a whole life insurance policy as well. The benefits of such a life insurance plan include:

1. More options when it comes to pay-outs after the maturity of the policy – you may choose to have either the cash value as the death benefit, making premiums lower, or the face value amount of the policy.

2. A Guaranteed minimum interest rate stipulated on the policy – your cash value is sure to grow at a set rate, regardless of the insurer’s financial performance.

3. Tax-deferred accumulation of wealth – There are only certain instances where state and federal taxes can apply.

4. Your money is placed in a diversified range of investments – reducing the risk of loss in case a particular investment goes south.

Similar to any type of permanent life insurance policy, when you buy universal life insurance coverage your initial premiums can be very expensive, this is because you’re building up your cash value, and like most permanent life insurance plans, premiums become cheaper in the long run.

However, it is still highly recommended that you shop around for the most competitive policies before you even decide to buy life insurance coverage. The Internet is a great place to start; with many life insurance portals and websites giving access to the latest rates and offers, making it possible to effectively identify the providers that is most affordable to you.

Do maintain a healthy lifestyle and seriously consider quitting smoking. Smoking alone and push rate up by as much as three to four times above the average. Hazardous activities or hobbies also tend to make life cover more costly; so if you intend to keep premiums affordable, then reduce your risk of dying sooner.