The Perks Of Universal Protection
Universal Life insurance is a beneficial policy that provides the ability to accrue and access tax-deferred cash values. When a person purchases this type of policy, premiums paid above the actual cost of the insurance are added to the cash value and accrue interest. A Universal Life policy is a useful addition to a financial planning portfolio. It allows the policyholder to protect assets and get a guaranteed minimum rate of return. Many contracts also allow the policyholder to withdraw funds from the cash value of the contract. These policies are useful for many purposes including providing income replacement for surviving family members and providing for end of life expenses such as funeral and unpaid hospital bills.
When a person buys a Universal Life insurance policy, the cash value above the cost to insure is invested. The interest gained on the cash value is set by the insuring company based on the rate of return for the invested portion, and the contract specifies a minimum guaranteed return. As long as there is a cash value above the cost of the policy, the insurance will never lapse. Premium payments may be flexible within a minimum and maximum amount depending on the type of contract.
There are a few different types of Universal Life policies on the market today. A Fixed Premium Universal Life policy will provide a cash value, but the parameters of the contract cannot be changed. A Flexible Universal Life policy allows flexibility to adjust premiums and change beneficiaries. Another policy is Guaranteed Universal Life. This life insurance provides a secondary guarantee if the contract holder makes minimum premium payments for a set period. Once these conditions are met, the policy will remain in force even if the cash value drops to zero.
There are many benefits to a Universal Life policy in addition to the ability to ensure the income replacement for family members. Flexible policies can adjust as personal and family needs fluctuate by changing beneficiaries, benefits, or premium payment schedules. In addition, the interest gained on the policy’s cash value is tax-deferred.