Broker Check

Have you looked into Universal Life Policies?

| November 23, 2022


     Universal life insurance is protection designed to last as long as an individual needs it to. A keyword to describe it is flexibility.  You can design a policy to cover you to a specific age or number of years. You can design it to build cash value or have that cash value added to your death benefit. You can customize it so that while you are in your working years your premium is higher, and then as you approach retirement your premium reduces while not affecting your death benefit. This policy has no maturity date. It ends when you plan for it to end or if you stop paying your premium and the cash value drops to zero. So long as your policy has a cash surrender value of at least an amount equal to your minimum cost of insurance, your policy remains in force.  

       Universal life insurance is permanent insurance that provides protection in case of death as well as a savings or cash value component.  These policies can build cash value, while offering flexibility in premium and death benefit. How can you have growth potential? The cash value part of your policy grows tax deferred. It can grow a few different ways. The most common way is your policy is issue with a minimum interest rate. That rate is applied to your cash value. Another way is if your policy has an “Indexing” feature. The cash value accumulation can be linked, in part, to the performance of an equity index. If you choose an equity index you are not investing in stocks or the index itself. Therefore, dividends paid by companies in the index are not part of the index calculation. 

What can you do with that cash value that has accumulated?

      If you choose certain death benefit options at application, that value can be added to your standard death benefit. So, the better it performs and grows, the higher your death benefit may be. Some plans allow you to add in income rider to your plan at application. What this means is that at some point in the future you can turn on a lifetime income stream that will not run out of time before you do. Another popular option is to take a tax- free loan to maybe finance a purchase you make instead of taking a loan from a bank. 

       Other options are available like having a joint policy with your spouse where the policy pays out a death benefit upon the death of the second spouse. 

       Universal life insurance defines flexibility. You can virtually design it to be exactly what you need it to be.