Facts on Universal Life Insurance

Universal life insurance is one of the many types of life insurance policies that you can get for you and your family today. Also referred to as flexible premium adjustable life insurance, it allows the policyholder to make adjustments between the premiums and investment, as he or she desires. Unlike regular whole life insurance which offers no flexibility for the policyholder and low interest on the cash value, a universal life insurance policy provides a lot of flexibility as far as the premium payment, the death benefit and the amount that goes toward the cash value are concerned. Universal life policies also guarantee higher minimum interest rates, which is usually 4 percent, on the cash value. In the event that the policyholder passes away, the policy can be paid two ways. The first would be to pay the amount of the policy’s face value through using the cash value. This is the typical way how most life insurance policies are. The second way would be to pay the face value plus the cash value of the policy. This, however, costs more. The interest that is earned on this type of life insurance policy is essentially based on the insurance company’s earnings. This means that if the company earns more than the account’s minimum guaranteed amount, then the policy would be earning more than this guaranteed minimum. Monthly adjustments may be made; however, the way as to how adjustments are calculated can vary from one company to another. If the company earns less than the minimum guaranteed, then the policy will only earn the minimum. Any interest earned on the policy is tax-deferred and the policy’s cash value can be accessed if needed. Keep in mind that it is important to compare universal life insurance policies and quotes before deciding to purchase for a policy. This would allow you to determine the best policy for you based on your needs.