In a whole-life policy, the premiums, cash value growth, and death benefit are guaranteed not to change. With UL, all those things are designed to be flexible. However, the amount of premiums you pay affects cash value growth. And as you use funds from the cash value, it will affect the amount your family receives when you're gone. It could even cause the policy to lapse, so you should stay in contact with your financial professional to help make sure your policy continues to meet your needs.
As with all permanent life insurance, there is a built-in cash reserve that grows over time and earns you interest. You can use your coverage to supplement your retirement income by taking out policy loans against its cash value or paying your premiums.
Universal life insurance is a type of permanent life insurance. Unlike term life insurance, which is meant for a specific period, such as 20 years, universal life insurance is in effect for the rest of your life (unless you stop making premium payments).
More specifically, the cash value component earns interest based on a money market rate of interest or, for some types of universal policies, a rate tied to a market index. Whatever you make will increase your cash value, helping you pay your premium. Lowering your monthly payments can be helpful if your financial situation changes.
This article will provide information about universal life insurance as well as break down the various types. Consider these policies with the help of a trusted financial advisor. They can be confusing.
Policyholders have certain flexibility compared to other types of permanent life insurance policies in that you can lower your premium payments or change your death benefit amount. Plus, the cash value component offers more potential to earn more interest – on the flip side, the value can go down over time.
Keep in mind that it will affect your cash value. If yours isn't, you will need the rest to replace your policy.