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Through a universal life insurance policy, you can choose to invest a portion of your premium payments into stocks, bonds, and money market accounts. Although the guaranteed interest amount on your universal life insurance quote will change with the market, it is currently at 4% for those who secure their policy before the amount changes again. This means that you can make a minimum of 4% on the policy.
One of the main differences between a whole and universal life insurance policy is that universal life insurance allows the insured to move their money between the investment portion of their account and the death benefit portion of their account.
This allows a flexibility that enables the insured to increase their death benefit without paying extra payments, simply by transferring the amount from the investment portion of their policy. They may also transfer funds from their death benefit to their investment accounts.
On the other hand, whole life insurance does not allow the insured to move money around in this manner.
The money in your universal life insurance account should be tax-deferred while your policy is in effect. If you cancel the policy, then the money you settle from it will be subject to taxation, based on your universal life insurance rate.
However, if you carry your universal life insurance policy through your entire life, then the money your beneficiaries receive could be free from taxes altogether.
Most universal life insurance quotes are set up for those who need a larger amount of life insurance (usually $25,000 and up). You may not even be able to find a universal life insurance policy that you can open for such a small face value. A better option may be to reevaluate your life insurance choices and check into other policy types.
If you choose to invest in an interest bearing account with your universal life insurance policy and you have accumulated enough interest from this investment, then you can use this amount to help pay off your future monthly premiums.
Allowing your universal life insurance policy to work for you in this way, will take the stress and hassle out of trying to make monthly life insurance payments to protect your family.
With a universal life insurance policy, the life insurance death benefit is usually paid from the premiums that have been given to the company and the available cash value.
Although you are never guaranteed to have a minimum cash value to withdraw from, you should be guaranteed a minimum death benefit after a certain amount of premium payments have been made - no matter what happens with the investment portion of your account.
There are many reasons why one would want to take out a universal life insurance policy. The universal life insurance policy may be the best life insurance option for you if:
- You need flexibility to accommodate changes in your life
– You want your policy to possibly gain money through investments
– You want to be able to withdraw or borrow against your cash value
If these points apply to you, then you may want to check into universal life insurance for your family.
Universal life insurance can help protect your family if should something happen to you, while allowing you to recoup part of your investment if you do not die.
If you do not die, you can collect the cash value of your universal life insurance policy once your need for life insurance has ended.
If you do die, your family can collect the death benefit from the universal life insurance policy.
The amount that you will be able to collect if you do not die will depend on how much of your premium payments were applied toward your cash value.
Universal life insurance can offer you the best of both a term and whole life insurance policy. On one hand, a universal life insurance policy allows for the flexibility of a term life policy. This flexibility is what allows the insured to change the specifics of their policy if and when they need to. On the other hand, a universal life insurance allows you to trade in your policy for a cash value just like a whole life policy. Universal life insurance can offer a third alternative for those who cannot decide between the two other policy types.
There is one big difference between universal life insurance and variable life insurance.
With variable universal life insurance, you do not have a set schedule and amount for your premium payments. You are allowed to pay as much or as little as you wish whenever you want as long as your account stays above a specified amount. So, if you don't have the money for a variable universal life insurance payment one month, you can skip that month's payment and make a larger payment toward your account next month.
With universal life insurance, you do not have the same month-to-month flexibility. You will have a set payment that you need to make by a set time each month.