Cash value will increase over time as you continue to pay your universal life insurance premiums. Depending on which insurer you choose, you may have to make an upfront premium payment or pay a fixed monthly premium.
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 However, you'll need to pay taxes once the money is withdrawn and your death benefit might decrease.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.
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.
A UL policy may have more options than whole-life or term coverage. It would be best if you managed the policy. With variable UL, you will need to decide how much premiums you are willing to pay. These variables and insurance costs that rise over time can impact your cash value. It would help if you also kept an eye on the value balance. If it drops to zero, premiums may go up, or your policy could be canceled.
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.
Universal life insurance, a type of permanent insurance, is one form. A universal policy provides coverage for life. As long as the insured pays premiums and meets any other conditions, they are covered. Universal life insurance, which is similar to many permanent life policies, offers both a savings component called "cash value" and lifelong protection. After your death, the policy's "cash value" is converted into a death benefit that is paid to your beneficiaries.
The policy's cash value is tax-deferred and grows over time, so there are no taxes due on any current earnings or interest. The death benefit is also income-tax-free for beneficiaries.