If you're considering a universal insurance policy, be aware of the risks involved. Do not fall for the promises of big investment returns. It is important to look beyond the projections and see the actual policy illustration.
The cash value component earns interest using a money market interest rate or, in some cases, a rate linked to a market index. Your cash value will rise, which will help you pay your premium. If your financial situation changes, it can help to lower your monthly payments.
Universal life insurance refers to a type or permanent life insurance. Unlike term life insurance that only covers a set period like 20 years or so, universal life insurance will continue to be in force until you stop paying premiums.
A UL policy gives the insured person many of the same permanent protection and benefits as whole life coverage, along with the added benefit of a flexible premium to help accommodate variable earnings. In addition, depending on the life insurance company and policy, you may also have the option to invest your cash value in various market-based investment options, giving you the potential for more growth. On the other hand, universal life offers fewer (or lower) cash value guarantees.
A UL policy offers insured persons many of same permanent benefits and protections as whole-life coverage. It also has the added benefit that a flexible premium can be adjusted to accommodate variable earnings. You may be able, depending on the policy and life insurance company, to invest your cash value into various market-based investment options. This will allow you to grow more. Universal life however offers less cash value guarantees, or lower ones.
If you are looking for a policy that offers lifelong coverage and a life-long insurance policy, universal life insurance might be the right fit. Universal life insurance provides a guaranteed death benefit. This allows you access to the policy's cash value.
Guaranteed universal life insurance (GUL) is also called no-lapse guaranteed universal life insurance, this type of policy offers a guaranteed death benefit and premiums that stay the same for the policy's life. Though often included under the permanent life insurance umbrella, GUL policies usually have an end date selected at the purchase time. Policyholders typically choose an advanced age – 95, 102, etc. – and the policy will remain active until that point. Unlike other permanent life policies, a GUL policy may have little or no cash value.