Life insurance policies come in many shapes and sizes. From temporary policies that provide coverage for a certain amount of time to permanent policies that offer a set amount of coverage for life, the option right for you will depend on your needs. Underneath each of these umbrellas is further distinctions, one example being universal or permanent life insurance, both of which policies fall into the whole life insurance category. If you’re wondering what universal life insurance is and how it fits into your world, read on!
Defining Universal Life Insurance Policies
Universal life insurance is a type of whole life insurance in which a person can hold their life insurance policy from the time they take out the policy until the time of their death, regardless of when. These universal policies differ from a term policy which would only cover a customer for a certain amount of time, like ten or twenty years. For those looking for fixed, long-term coverage, universal life insurance can be a great option.
How Does Universal Life Insurance Work?
While life insurance policies can vary based on micro-level benefits, they generally all work the same. You will take out a policy and pay a certain premium amount in order to maintain that policy. In the event of your death, granted that the policy is still in good standing, your assigned beneficiaries will be able to use the funds from your policy to address financial needs.
The key difference to remember in universal life insurance policies is the flexibility they provide, which can be both positive and negative. While you can adjust payments or use cash value components as needed, these all impact how much beneficiaries will receive in the end. So rather than having a set benefit amount, the benefit your beneficiaries will receive can depend greatly.
Benefits of a Universal Life Insurance Policy
Universal life insurance policies provide a number of benefits to customers who hold a policy. From the flexibility you need to cash value options, here are the benefits to keep in mind.
Adjustable Premium Amounts
For those who need a policy that works with them for their entire life, universal life insurance can offer the flexibility you won’t find elsewhere. Universal life insurance allows policyholders to change their monthly premiums to adjust in times of need. So, if you’re struggling during the holidays or for another reason, you may be able to negotiate your universal life insurance fees down until you’re in a better position and resume normal payments or slightly more costly payments.
In addition to the peace of mind that accompanies having a policy that won’t ever expire, another benefit is the financial or tax benefits. That’s because whole policies, in general, grow a cash value component over time. So, as you hold your policy, the amount of cash value, also sometimes referred to as equity, rises with interest. That cash value can be borrowed against in times of need, used to help cover the policy itself, or reinvested into other financial needs.
The Bottom Line
A Universal life insurance policy can be a great financial decision for those looking to find a robust life insurance option. Both adaptable and flexible, this type of life insurance offers many benefits with few detriments. If you’re looking for a type of whole insurance that works with your ever-changing needs, universal life insurance can be the perfect solution.
Name: Michael Bertini
Job Title: Consultant
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