Reader’s Question:

What are the benefits that I can get from universal life insurance policy aside from the flexibility in the amount applied to life insurance policy?

Janice

Fort Collins, CO

A universal life insurance policy is a term life insurance policy that has element of savings. If you are a policy holder of a universal life insurance policy, you can adjust the amount of premium applied to the life insurance protection and savings anytime. Reducing the amount can be easy but if you want to increase your life insurance, the life insurance company may require you a proof of insurability.

Owning a universal life insurance policy has several advantages. With this type of life insurance policy, the death benefits are level or do not increase. The proceeds are paid upon the death of the policyholder and are free from income tax. Universal life insurance allows the policy owner to increase or decrease the amount of saving. Increasing the amount of life insurance requires the policyholder to present an evidence of insurability. Because of the saving element, this life insurance policy accumulates cash values tax deferred. The policy owner can access this cash in case of an emergency. Lastly, an increase in cash value increases the face amount or death benefit accordingly.

There are also disadvantages when you purchase a universal life insurance policy. The premium of this type of life insurance is a little high but the extra premium is worth it if you want to save money. In the event of a decline in interest rate, the amount of premium may be required to increase. Otherwise, the policy may lapse. The policy holder can actually reduce the amount of the amount of his/her life insurance as an alternative to this situation.

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.

Reader’s Question:

I have a few friends in Cleveland Ohio trying to win me into buying my own life insurance. They say universal life insurance is generally beneficial. Who can actually benefit from universal life insurance?

Charlie

Cleveland, OH

Hello Charlie

Before I answer your question, let me run you through the basics of universal life insurance.

A universal life insurance is a permanent insurance where you pay premiums at a flexible rate for cash accumulation. In other words, a universal life insurance is not purely life insurance. It is also an investment at the same time.

In comparison with term life which pays for the death benefit alone, universal life insurance is actually a savings. In essence, both the insured and the beneficiary benefit from universal life insurance. Unlike term life where only the beneficiaries can get the life insurance amount upon the death of the insured, the insured will be able to benefit the amount invested with universal life insurance.

In fact, the accumulated cash can be used to pay the premiums to keep the insurance in force. And if the cash have accumulated enough, it ca be withdrawn for other use and returned to keep the investment and insurance enforced and increase cash value. What is even more beneficial about the universal life insurance is that payment of its premiums is flexible so the policyholder pays based on current interest rate.

A universal life insurance is beneficial also to those who want to accumulate cash up to the person’s 70th year. When the person started investing at age 30, he could have accumulated enough cash to supplement his retirement.

I think it is best for you to talk to a local insurer in Cleveland Ohio about your options for insurance before you will get convinced by your friends to buy universal life insurance. Once you get the agent’s opinion, you can proceed to comparing their quote to the ones you will get free online. I encourage you to get free quotes now while you are online which can also be done in this page.