Universal life insurance (UL) is one of two types of permanent insurance. The other is whole-life insurance. A universal policy, like real life, can provide lifetime protection and build cash value with tax benefits. UL allows you to increase or decrease your premiums within certain limits so that it may cost less than full coverage. It does not offer the same guarantees as whole life. If you pay too few premiums, it could impact your cash value and reduce the amount of your death benefit.
Universal life insurance, a type of permanent insurance coverage, offers both a mortality benefit and a cash worth component. Your policy will not expire if you don't pay your premiums, or if there is no death benefit. There are three types, guaranteed universal, guaranteed universal, and variable universal.
Your funds will continue experiencing income-tax-free growth, as long your cash value does not change. If your investments do not perform well, the accumulated value of cash could decrease. However, you'll need to pay taxes once the money is withdrawn and your death benefit might decrease. You can keep all or most of the accumulated cash value in case you want to terminate your policy.
We'll explain what you need to know about universal life insurance and break down the different types of universal life policies. Ensure you're working with a trusted financial advisor or experienced life insurance agent when considering these policies. They can be complex.
Remember that doing so will eat up your cash value – if there isn't enough, you will need to make up the difference, or your policy will lapse.
Whole-life policies guarantee that premiums, cash values growth, and death benefits will not change. All these aspects are made flexible by UL. Cash value growth can be affected by the amount you pay for premiums. Cash value growth is affected by how much you use. This will impact the amount that your family receives after you are gone. It can lead to policy lapse. Keep in touch with your financial professional so they can ensure that your policy continues to meet all your needs.
As you keep paying your premiums on your universal life insurance policy, you'll experience cash value growth over time. Depending on the insurer and the policy you ultimately go with, you may need to pay one upfront premium payment or a fixed monthly premium.