Universal Life Insurance

Because contrary to what a lot of people think, the need for life insurance often persists long after the kids have graduated college or the mortgage has been paid off. If you died the day after your youngest child graduated from college, your spouse would still be faced with daily living expenses. And what if your spouse outlives you by 10, 20 or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

Universal Life offers flexible and adjustable premiums that give you the option to make higher premium payments when you have extra cash on hand or lower ones when money is tight.

Universal Life allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. You also can reduce or increase the death benefit more easily than under a traditional Whole Life policy.

In recent years, there’s been considerable interest in what’s commonly referred to as Universal Life with Secondary Guarantees (also known as a “No-Lapse Guarantee”, or a “Guaranteed Universal Life policy). With an ordinary Universal Life product, the policy could lapse under certain circumstances (e.g., interest rates fall below projections, insurance costs or administrative expenses rise, etc). When you buy a policy with a “secondary guarantee,” you’re guaranteed that the policy won’t lapse even if the above factors come to pass.  One of the most attractive things about Guaranteed Universal Life policies is that they provide lifelong coverage at rates that can be considerably lower than other forms of permanent insurance.

Many Universal Life policies that may not have the “Guaranteed” benefits of a Guaranteed UL will make up for that by providing a competitive interest rate where cash values in the policy can grow.  There are several types of Accumulation Universal Life options, two of the more popular options are below:

• Current Assumption UL – a Universal Life policy that may offer some period of Guaranteed death benefit, but uses the insurance carriers’ investment portfolio to establish a current interest rate for the growth of the cash value in your policy.
• Indexed UL – a Universal Life policy that may offer some period of Guaranteed death benefit, but the cash value is tied to the growth of an index, usually the S&P 500. There are different methods to how your cash value is invested, but this type of plan provides greater upside potential than a current assumption UL product, and downside protection (if the S&P 500 is negative at the end of the year, your policy would get a 0% rate and will never lose money)

Another key characteristic of Universal Life insurance is a feature known as cash value or cash-surrender value. In fact, permanent insurance is often referred to as cash-value insurance because these types of policies can build cash value over time, as well as provide a death benefit to your beneficiaries.

Cash values, which accumulate on a tax-deferred basis just like assets in most retirement and tuition savings plans, can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement. When you borrow money from a permanent insurance policy, you’re using the policy’s cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value.

If you need or want to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of death benefit protection covering you for your lifetime. If you decide to stop paying premiums and surrender your policy, the guaranteed policy values are yours. Just know that if you surrender your policy in the early years, there may be little or no cash value.