We already know that very generally speaking, there are two types of life insurance products available. There is term life insurance to cover short term needs, and there is permanent life insurance to cover long term needs. In previous articles we have discussed whole life policies as great options for covering permanent life insurance needs, but what about the Universal Life policy?
Like Whole Life insurance policies, Universal life insurance policies are also permanent life insurance policies with a savings or investment element. With a whole life policy, you, the insured, agrees to pay a level amount in premiums on a regular basis for a specific death benefit. The savings element grows based on dividends the policy earns. You are able to allow the dividends to accumulate or buy more insurance, which then increases the benefit amount to be paid to your beneficiary.
A Universal life policy however is far more flexible. Premiums are not level and set in stone. You have the option of increasing or decreasing premiums as well as paying them on a regular or irregular basis. The biggest difference though, is the fact that with a UL policy you get to choose the actual investment vehicle the investment portion of your premiums go into, but with a WL policy you don’t. When enough money has accumulated in savings/investment portion of your UL policy, you then have the option of changing your premium payments – provided there is enough money in your account to cover the costs. This is a great feature if your financial situation suddenly changes.
It is important to note that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end.
Reach out to me directly and I will be happy to guide you through the process of choosing the right insurance product for your unique needs.