Universal life insurance

What is universal life insurance?

Universal Life also covers you for your whole life but gives you more flexibility – letting you adjust premium payments and schedules to fit your life and budget, while still giving you benefits you can use during your life.

How can universal life Insurance fit your financial plan?

A UL insurance option provides more flexibility than whole life insurance. Policyholders can adjust their premiums and death benefits. UL insurance premiums consist of two components: a cost of insurance (COI) amount and a saving component, known as the cash value.

As the name implies, the COI is the minimum amount of a premium payment required to keep the policy active. It consists of several items rolled together into one payment. COI includes the charges for mortality, policy administration, and other directly associated expenses to keeping the policy in force. COI will vary by policy based on the policyholder’s age, insurability, and the insured risk amount.

Much like a savings account, a UL insurance policy can accumulate cash value. In a UL insurance policy, the cash value earns interest based on the current market or minimum interest rate, whichever is greater. As cash value accumulates, policyholders may access a portion of the cash value without affecting the guaranteed death benefit.

Who is universal life insurance for?

If you want life insurance coverage that lasts the duration of your life, you might consider a universal life insurance policy. For example, universal life insurance can fund a trust to take care of a special needs child or other dependents after you’re gone.

You might also consider a universal life insurance policy if you have big long-term savings goals and need both an investment vehicle and life insurance, but only after you’ve maximized other savings options such as retirement plans.