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What Is Universal Life Insurance?
So what is Universal Life Insurance and how can it help you?
You may have heard of whole life insurance and term life insurance, but what is this type of insurance? Actually it is also a kind of permanent life insurance that protects you for your lifetime.
Whole Life Insurance vs. Universal Life Insurance?
Whole life insurance and universal life insurance are both permanent types of life coverage instruments.
There are four basic parts to both universal and whole life. The mortality cost, which shows what part of your deposit covers the death benefit of the policy.
The administration charges which include the premium taxes and costs incurred by the insurance company to manage your policy.
The savings and investment portion is the amount of money you have left to after the mortality costs and administration charges. This money is sometimes called the cash value, fund value, or cash surrender value.
The fourth part of a whole or universal insurance policy is called the return on the savings. This is the interest rate that is credited to the cash value of your policy every year.
A whole life policy is a permanent policy where the premiums are set at a fixed amount and never change until you have paid funded the policy in full. Also, the amount of the death benefit will not increase or decrease over the life of the policy.
One of the drawbacks to a whole life policy is that the insurance company does not have to disclose the mortality cost or the administrative costs to you.
With a universal life policy you can put any excess money into the policy which will increase the cash value of the policy immediately.
In conclusion, if you are more comfortable with a fixed premium and death benefits, then a whole life policy may be your best choice. However, if you want more flexibility and have the time to monitor your policy, then a universal life policy may be your best option.
Whichever type you may choose, always compare life insurance companies, their premiums, rate of return, and customer service. Don't feel pressured to buy a product that you feel may not meet your needs or wants.
Shop around for an agent you can feel comfortable with and who is sensitive to your individual situation and life goals.
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