What Is Universal Life Insurance?
Universal life insurance is a hybrid insurance product that combines the protection of a conventional term insurance policy with the permanence and cash value accumulation of a whole life policy. It's like buying a permanent term policy and investing the difference in fixed income securities. Unlike traditional whole life policies, universal life insurance divides death protection and cash value accumulation into separate components. With universal life insurance, you may pay premiums at any time, in any amount (subject to certain limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
Universal life insurance was developed from whole life insurance and is similar to whole life insurance in certain ways. However, there are a few differences. Universal life insurance is more flexible in terms of death benefit and premiums. The death benefit can be increased (subject to insurability) and decreased without surrendering the policy or getting a new one, as would be required with whole life insurance. Also, a range of premium payments can be made to the policy, from a minimum amount to cover various guarantees the policy may offer to the maximum amount allowed by IRS rules. Another difference is that universal life insurance shifts some of the risk for maintaining the death benefit to the insured. In a whole life policy, as long as every premium payment is made, the death benefit is guaranteed to be paid if the insured dies. With a universal life insurance policy, the policy will lapse (which means that the death benefit will no longer be in force) if the cash value or premium payments are not enough to cover the cost of insurance. Many insurers will add a guarantee that if certain premium payments are made for a given period, the policy will remain in force even if the cash value drops to zero.
As with whole life insurance, the cash value (the difference between the premium and the cost of insurance) will grow tax-deferred as long as the policy remains in force. If the policy is held until death, the cash value is given to the beneficiary tax-free in the form of the death benefit. As a policyholder, you can access this cash value via a policy loan without incurring tax on gains.
Traditionally, most people bought life insurance through an agent that would come to their houses and present them with options for permanent life insurance. More often than not, the agent was working for only one company, sometimes using scare tactics and high-pressure salesmanship to guilt-trip a customer into buying a policy. With the rise of the Internet, consumers are now free to research different types of policies from different companies in an unbiased manner. On the other hand, the Internet has long offered instant term life quote and universal life insurance quote comparisons without any expert consultation. However, the nature of universal life insurance is more complicated, because it is permanent and may include a personal savings element. Finding the best universal life insurance online requires the ability to compare companies and policies without bias, as well as access to highly knowledgeable life insurance professionals. BeamaLife.com is an industry-recognized website for the best universal life insurance and provides free universal life insurance quotes.
