Universal life insurance might be the right choice for you if you're in the market for a life insurance policy with lifelong coverage. Universal life insurance can offer a guaranteed death benefit, allows you to tap into the policy's cash value, and may give you the flexibility to adjust your premium payments and death benefits.
Don't forget to keep in mind that you can lose your cash value. You will have to make up any difference or your policy could be cancelled.
Universal life insurance can be described as a permanent type of insurance. Universal life insurance is not like term life insurance with a limited duration, such as 20 years. It is therefore in force for your entire life unless you cease making premium payments.
When considering universal life insurance, think about how much risk you are willing and able to take. Don't believe anyone when they promise you huge investment gains. You should carefully examine the guarantee portions of the policy illustration.
A UL policy is more complicated than a term or whole-life coverage. The policy must be managed. You need to decide how much to pay for your premiums. Variable UL also requires you to make investment decisions. These variables, together with rising insurance costs, can have an effect on and even affect your cash value. Your value balance is also important. If it drops below zero, your premiums can go up, and the policy may be cancelled.
You can only borrow against cash. If you pay off the entire amount within your policy's lifetime, the loan amount won't be taxable. If the loan amount (including interest) exceeds cash value, your policy may end.
If you are still alive and your policy is active, your beneficiaries will only get the death benefit. Insurance companies keep any additional funds. The beneficiaries receive either a single payment that is tax-free or monthly or annually. Annuities are another option that some insurers offer. These are contracts in which the insurer agrees not to pay the beneficiary any one-time fees or monthly payments, but instead they will pay the beneficiary for a predetermined amount.