Nobody wants to talk about the idea of dying young. Unfortunately, the unexpected often happens. And when it does, life insurance can make all the difference to the future of your family or beneficiaries.
From universal, whole life, simplified issue, variable universal, permanent life, and guaranteed to term life insurance, there is a policy for whatever you can imagine. So, which option is good for you? Well, we’ll highlight what you can expect when you decide to buy universal life insurance.
Essentially, universal life insurance offers a lifetime death benefit provided you continue to pay the set premium. Accordingly, your full policy amount is payable to your beneficiaries in the event of your death.
Like other life insurance policies, this may seem like a great plan on the surface, so let’s dig deeper.
How it works
A portion of premium that you pay for universal life insurance is often put into the cost of the life policy, which is often given to your beneficiary upon your death and another portion is invested and used as your investment savings.
The main idea behind portioning your premium is that the investment will grow over time to the level that it can even pay for the life portion of the policy. This implies that you can pay for a certain number of years and the investment could begin to cater to the cost of the premium, giving you a chance to pay for life insurance for the whole of your life without the need to keep paying the initial premium.
Other benefits of universal life insurance include:
- You can always borrow against the cash value of your policy. How and when you can borrow depends on the terms and conditions of your insurance company.
- It is possible to adjust your death benefit. At some point, you are allowed to increase the amount that will be paid to your beneficiaries upon your death. A bigger percentage of insurance companies that offer this policy allow for this type of flexibility as long as you pass a few conditions such as a medical exam.
Hidden Secrets about Universal Life Insurance
Many people assume that universal life insurance is good as long as you are alive. However, this isn’t the case in most instances as most of the policies have maturity dates. In other words, the policy can end, leaving you with nothing, especially if you have re-invested all your cash value to pay premiums.
Additionally, whenever you withdraw any cash from your savings portion, the same amount will be deducted from the death benefit that will be paid to your beneficiary.
Even worse, in the event of your death, the insurance company gets to keep the cash value of your policy. Your beneficiaries are only given the death benefit.
Universal life insurance is a great policy but it requires some deep research and meticulous financial planning to get the most out of it. Always try to investigate what has happened to other past clients’ universal life insurance policies to figure out how you can avoid the downfalls that they went through when the markets turned. And always remember that a wrong decision could cost you thousands.