What is Universal Life Insurance?

Answer:

Universal Life Insurance is a

type of permanent life insurance. Of the two main types of permanent coverage, it is the least expensive and offers great flexibility.

With Universal Life Insurance, you are able to purchase a plan that will stay in force until you die and earn cash value. Interest will accumulate on the portion of the premium not allocated to pay the death benefit, fees, or commissions.

The best thing about a Universal Life Insurance plan is that it’s permanent—not that it earns cash value. Insurers will usually provide guarantees with regard to keeping the plan in place as long as you meet a minimum required premium. But the guarantees provided for how much cash you’ll earn aren’t that great. Over time though, it’s possible that you can earn a fair amount of interest and build a good sum of money. This is where people often get in trouble. They’re tempted to take some or all of the cash value as a loan, or perhaps they’ll stop paying premiums for awhile and allow the cash value of the plan to pay them. Policy holders can get behind and never catch up. Suddenly, the plan that was purchased for its’ permanence has lost the main benefit it provided. As soon as cash value is removed and not replaced, the permanent nature of the plan is compromised since the foundation of it is built on paying a certain amount over a period of time.

If a Universal Life Insurance plan is considered as an option—you should get it for the right reasons. You need something that will last forever and you intend to pay the premiums forever or you intend to fund it with a large sum of money from some other resource. If you have an agent that’s telling you he’ll make you a ton of money… be skeptical. There are some aggressive earners out there in the form of Equity Indexed Universal Life Insurance for example—but mostly you may wind up getting an expensive lesson in why term life insurance is a better choice for most.


	more Q&A sessions like this
	What are the main types of life insurance? What is whole life insurance? What is the Cash Value of a Life Insurance Policy? What is Permanent Life Insurance? What is Variable-Universal Life Insurance? Where can I get a Whole Life Insurance Quote? What is burial insurance? What is Life Insurance? What is Variable Life Insurance? How do I know which Life Insurance product to purchase?