There are many types of universal insurance policies. Understanding what you're purchasing is crucial. There are many differences in their features and costs.
Considering a universal life insurance policy, consider how much risk you're willing to take. Don't be sold on promises of significant investment gains that might not come true. Be sure to examine the guaranteed portions of the policy illustration, not just the rosy projections.
Policiesholders have greater flexibility than other types of permanent insurance policies. For example, you can reduce your premium payments or alter your death benefit amount. You can also earn more interest with the cash value component, although it is possible for the value to decrease over time.
The policy goes into effect the day after it is issued. UL may provide an income tax-free and death benefit to your family to help you protect their financial well-being. As long as you maintain a positive cash balance, your coverage is not canceled.
If your policy remains active after your death, your beneficiaries only get the death benefits. The insurance company keeps any excess funds. Beneficiaries receive either one tax-free payment or monthly and/or annual installments. Annuities are an option for some insurers. This is where the insurer agrees with the beneficiary to pay a onetime fee or periodic payments over a set period.
Specific universal life insurance policies also include a cash value component. The cash value can be withdrawn or borrowed. The death benefit payout to beneficiaries will be reduced by the amount of any outstanding loans or leaves. However, the cash value is more important for some buyers than a payout to beneficiaries.
There are many different types universal life insurance policies. Make sure you understand the details. They come with different features and cost.