Reader’s Question:

Why should I go with a Universal Life Insurance Plan? Are they better than the whole life policy that I currently have here in North Carolina?

Enrico

Charlotte, NC

Universal Life Insurance Plans are a type of whole life or permanent life insurance coverage that is geared more towards individuals who are investment-oriented and would like to have more control of how your money is invested. Universal Life Insurance policies also reflect the kind of risk tolerance that you would have when investing.

So a Universal Insurance plan can also be seen as a life insurance policy with a sort of mutual fund attached to it. The goal is to grow your money or the Cash-Value amount of your policy in the long-term (and while the policy is still in force). Admittedly, this kind of policy is not for everyone and it would be a good idea to have some basic knowledge about how investment portfolios work.

The only real difference between a traditional whole life plan and a universal life insurance plan is that you are given control over how your money grows. If you are somewhat of a risk-taker, even a conservative one and recognize that you can make money (a lot of it) by investing and also wants the capability of choosing what kind of investment mechanisms your money should be going into, then a Universal Life Insurance Plan might be for you.

This kind of policy has a lot of promise, but like anything there will always be some amount of risk involved so consult a life insurance agent or broker there in North Carolina, and ask as much questions as you feel necessary to understand this kind of coverage.

Reader’s Question:

I have encountered a person mentioning about investing in variable life insurance. Then I have another friend who received a proposal for variable universal insurance. Are the two the same in Florida concerning life insurance?

Cheska

Gainsville, FL

I’m sure that you have also been approached by life insurance agents in Florida because your friends have been contacted too. Anyway, to answer your question, both variable life insurance and variable universal life insurance are permanent life insurance that has the life coverage and the cash value. Meaning, you are not only paying for life insurance, you are also investing for cash which accumulates over a period of time. These are the main similarities of the two life insurance products.

The variable life insurance has cash value which is invested in stocks, bonds and mutual fund for money market. This seems attractive in a sense that these investments grow quickly and in large amount. I know you’ll agree that stocks and bonds are good investment when it is performing well. However, there’s a risk that these investment may not work well thus posing risk to your money. Once the investment is a failure, you would decrease the face amount of your life insurance together with the failed investment. However, there are policies of variable life insurance that guarantees death benefit within minimum level.

Variable universal life insurance has the same characteristics as the variable life insurance. What makes it different is that it has the features of the universal life insurance in premium payment. Just like universal life insurance, the variable universal life insurance is flexible in premium payment because it is dependent on the prevailing market interest rate. Such flexibility in premium is the only difference with the variable life insurance.