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 currently own a 2-year old life insurance policy but I’m not satisfied with the premiums I’m paying. Can I do something to get cheaper life insurance rates?

Baron

Lafayette, IN

Yes, the good news is that there are still some effective ways to get savings on your life insurance coverage. Here are a few tips that could prove quite useful to you:

1. Make Sure You Have the Right Policy

Paying for the wrong kind of policy is an utter waste of money, but you’ll be surprised at how often this happens. If you just need coverage for a certain period of time, such as while raising a family or paying your mortgage, then go with a term life insurance plan. Want to accumulate substantial amount of money and have permanent coverage? Then a whole life insurance plan is recommended.

2. Take Advantage of “Price Breaks”

With most life insurers today, choosing a higher coverage amount (a.k.a. death benefit or face value) can actually give you lower rates. So if choosing between a $350,000 policy and a $450,000, going with the latter can actually save you money.

3. Live a Healthier Lifestyle

Taking care of your health and quitting smoking can do real wonders in keeping your rates affordable. There is no better time to start this than now.

4. Go with Annual Payment Plans

If your life insurer offers this, consider paying your coverage a year in advance. This entitles you to get discounts or lowered premiums.

5. Look for Discounts

Discounts abound, and you want to make sure to ask your insurer about those you might be eligible for. This is an almost effortless to get savings out of your life insurance bills.

6. It Wouldn’t Hurt to Shop Around

There are hundreds of life insurance companies out there and it would be a good idea to run a free quote check from insurance comparison portals (like this website) to know what is being offered. There are times when the only way to get cheaper life insurance is to switch carriers.