Accounting and Finance Site

Universal Life Insurance Guide

Some of you have probably heard of universal policies used for insuring life. What are they all about and what benefits do universal policies bring to their holders? Well, simply put, universal insurance polices are insurance products that provide coverage for a person’s entire life.

Universal insurance policies are a form of whole life products that most of you are quite common with. Term insurance policies provide coverage only for a specified period of time, whether permanent policies require you to pay premiums for the entire life and respectively provides coverage for as long as you live. It is important to understand this difference, because universal policies can be regarded as a combination of term insurance with some of the investment options provided only with whole life policies.

Universal insurance policies are a specific insurance product that targets certain groups of people, while other groups may think it’s useless for them. To make it clear to you, here’s a short explanation of a universal life insurance policy. Like any other insurance policy used for covering life, universal policies have death benefits that are paid out when the policy holder passes away. This is what both term and continuous policies provide. However, universal policies also incorporate an element, which is more common in continuous policies: an additional tax-free savings account. This account is used to accumulate money over a long period of time, which then can be employed for paying your insurance premiums instead of you. To put it in other words, your policy will start paying for itself over a certain period of time so you won’t have to pay premiums for the entire policy term. Besides, this money can be used for other purposes as well, without affecting your death benefit like in case of whole life insurance policies.

But not everyone will find such policies useful. Universal insurance policies are most useful for those who are looking for long term insurance services and plan to have coverage upon retirement. In order to accumulate any significant amount of money at your savings account within universal insurance you’ll have to pay insurance premiums for at least 15 years before getting any results. So anyone looking for less prolonged coverage plans or mortgage securing options should look into other insurance products or special investment tools, rather than universal policies. Otherwise, having such a policy for a long time will sure give you certain possibilities that other insurance products.

First of all universal insurance is a relatively cheap life insurance if compared to whole life policies. First of all, you don’t have to pay premiums over your entire lifetime as at a certain point when there’s enough money accumulated, the policy will start paying for itself. And it won’t affect your death benefits, like most whole life insurance policies do.

In order to get the most attractive and useful universal policy you should take your time and compare life insurance quotes for this specific product type. It really pays to shop around, because different companies have different rates and options for their universal insurance polices and you of course want to get the best product for the lowest price. Don’t hesitate to see what different companies have to offer and get the policy that attracts you the most.

Tags: Guide, Insurance, Life, Universal

Term Life, Whole Life And Universal Life, Graded Premium Life And Variable Life Insurance

Term life, whole life and universal life insurance are the the types of policies you are most likely to encounter when you set out to get quotes or, in general, examine life insurance policies. There are, however other types that not many people know much about. This may be because the companies or the agents themselves just haven’t taken the time to promote them much, or perhaps, the agents are not qualified to market some of them. The other policies I refer to are the graded premium life policies, the variable life and the variable universal life policies.

Term Insurance

Term policies come in many forms. Available to you are the 5 year, 10 year, 15 year, 20 year, 25 year, 30 year and term to age 65 plans. The one you choose would depend on how long you want to keep the protection. The time depends on whether you are single, married, whether you have dependent children or not. You may want to think about whether you have a dependent spouse as well.

Business people buy term insurance as well, whether we are talking about a business partnership, a sole proprietorship, an s corporation, a c corporation or a limited liability company.

Whole Life

When deciding between term life, whole life and universal life or any of the other types you may want to know which is the most popular with the consumer. The whole life policy is the most bought policy. Actually, the consumer prefers modified whole life policies or may be the non participating straight life policy as it costs less than the participating plan.

People like the idea that this policy lasts until they die even if death occurs at age 100. Another thing to keep in mind is that term policies don’t last very long. Why! I will tell you why. Apart from the fact that term policies are designed to last for a limited period of time these policies tend to be the first thing people drop when they have financial problems.

There is no cash value and the feeling is that they can always get another one. They pay very little attention to the fact that when they are ready to replace the policy it will cost more as this person is now older. There may also be the problem that the purchaser may not be in as good a physical condition as when the policy was initially purchased. This would result in a higher premium. The new policy may be rated, that means additional cost, or it may be declined by the company.

Whole life has a cash surrender policy, or a loan value.

Universal Life

Although this type of insurance is term based it does have a savings element attached, thus it is similar in many ways to the whole life policy.

Other Types

Term life, whole life and universal life policies are most purchased so most people have some idea how they work but what of graded premium, variable life and variable universal life. Graded premium life is simply a whole life policy with an initial premium a little more than half the cost of the regular whole life plan at the age of purchase. The premiums increase uniformly for a specific period, 5 or 10 years, then levels off at a little more than they would be had the premium cost been level from the beginning.

Variable universal life is permanent life insurance based and also includes an investment portfolio, like a mutual fund. Variable life insurance is whole life based and also has investments attached. A special license is needed to sell these policies.

Term life, whole life and universal life insurance sell more than any of the other policies.

Tags: Graded, Insurance, Life, Premium, Term, Universal, Variable, Whole

Universal Life Insurance Explained

Consider universal life insurance. One of the more popular permanent policies is the universal life policy. What is this universal life all about anyway? This policy is permanent insurance which allows for flexibility in premium payments as well as in death benefit amounts. Think of this policy as a savings account with a life insurance policy attached.

Premium Payments

Unlike other types of life policies your premium payments are deposited into a savings account which earns interest on your money. Monthly withdrawals are taken from your account to pay administrative costs and life insurance premium costs.

You can enter into a contract with the company of your choice to deposit money into your account on a regular basis like you do with any other policy. Your premiums can be monthly, quarterly, half yearly or annually. On the other hand, you may choose to deposit larger amounts into your account in a less frequent manner. You can make your deposits in your universal life insurance account whenever you feel the need or desire to do so.

It does not matter which way you choose to go. The important thing to keep in mind is that there always needs to be sufficient money in the account to take care of the premium payments.

The company includes in your contract a minimal guaranteed interest rate on the money in your account.

As long as you keep depositing the minimum amount required your universal life policy cannot fall into a state of lapse.

Savings Element

You may want to know if it would be better to buy term insurance and just put the rest of the money into a savings account. The savings portion of your deposit has a guaranteed interest rate. You can deposit money when you want to. Term life insurance is temporary insurance. You buy a term policy for a specific number of years. If you need life insurance after that period of time you may not be able to qualify for it.

You may want to use your saving plan for a college fund for your children or possibly to top up your retirement fund.

The life insurance attached to your plan, though term based, lasts much longer that the better known term policies. You can keep your universal life insurance policy for the rest of your life. You can reduce the amount of death benefit any time you choose. You can also increase the death benefit but, depending on age and physical condition you may need to prove that you qualify for the additional coverage.

Policy Riders

You can add the waiver of premium rider to your policy. This provides that if you should become disabled for a minimum of 6 months the insurance company will pay your premiums for you for as long as you are disabled, even if it is for the rest of your life.

You can also add the double indemnity rider to your policy which provides double the death benefit if your death occurs accidentally.

Tags: Explained, Insurance, Life, Universal