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What is Universal Life Insurance
Often times, people believe that whole life insurance and universal life insurance are the same. Both policies do provide protection for your entire family and most key in many cases, though there are large differences between whole life policies and universal life policies.
Universal Life Insurance vs Whole Life Insurance
Whole life policies are more straightforward than universal life insurance policies. When it comes to whole life insurance, you basically pay a set rate for a guaranteed death benefit, and the money will be there for your family when you die. Universal life insurance does not work this way, so you should make sure that you understand the types of universal life coverage before you choose to go that route.
First off, a traditional universal life insurance policy is not guaranteed. With other types of permanent life insurance policies, your premium rates are guaranteed to stay the same for your entire life. Universal life insurance is different. Your cost of insurance in a universal life insurance policy increases as you get older. The term for this is a rising cost of coverage. What this means is that the insurance company can increase the cost of your universal life insurance policy as you get older.
Risks And Benefits Of Universal Life Insurance
There's often a risk when it comes to having a universal insurance life insurance policy because the cash value that is accumulated by the policy does not always cover the costs of the premium increases later on.
A benefit to a universal life insurance policy is that you may be able to decrease the amount your payments are on occasion (or now and then skip a payment). When this happens, the money that you take from your cash value must be paid back, though with interest. Sometimes this can be a great benefit, but other times it can be put in the negative category. The flexible cost of coverage also works both ways.
One of the most common reasons that people are drawn to universal life insurance is because the idea of accumulating tax-deferred savings is appealing to them. When adding this to providing a life insurance benefit to their family, it sounds like a good deal. It can be a good deal in some situations, but it is not the right plan for a majority of people and situations.
All in all, a value of a universal life insurance policy is connected to a lot of things. Whether it is how high the insurance rate is (or low), or how well the market is doing, there are a lot of factors that affect universal life insurance policies. It is important to monitor the balance of your cash value if you choose to get a universal life insurance policy. This way you can be careful with your investment and be more aware of the possible increases in your cost of coverage. If your cash value is not able to cover the costs of premium increases, you may be asked to put more money into the policy.
Guaranteed Life Insurance
More recently guaranteed universal life insurance policies have become much more attractive than the traditional universal life insurance. This is because it guaranteed benefits are a part of the policy. Guaranteed universal life insurance policies rate will not increase over time, and there are no risky investment strategies to worry about. While a traditional universal life insurance plan needs an investment to build on (which is more money in addition to the cost of the life insurance, and tends to make it more expensive), guaranteed universal life insurance policies have no investment value. The rates are level until the age you choose. Remember though, that you do pick an age that the rate will remain the same through. Usually this age is between 90 and 120.
Once people reach retirement age, they often do not need life insurance, though there are exceptions. If you are not sure if you are in need of a life insurance policy, or which type would be best for you, do not hesitate to call. We can talk you through the process and help you determine your needs. We can also give you a quote so you have the numbers ready, whether you decide to get insurance now, later, or not at all. At General Insurance, we want to make sure you have the protection you need, call today!