Universal Life Insurance

Universal life insurance is a type of permanent life insurance policy that is generally more affordable than other options. In addition to providing a death benefit, universal life insurance also provides flexible premiums and includes a cash value savings component which can be used to supplement income and pay expenses.

What Is Universal Life Insurance?

Beyond affordability, universal life (UL) policies are also considered to be the most flexible kind of life insurance. Rather than simply providing a fixed death benefit amount for a fixed premium payment, UL policies offer policyholders flexibility with their premium payments and their death benefit amount.

People who own universal life insurance policies can make periodic adjustments according to their needs. UL policies also offer a built-in cash value, so you can set money aside on a tax-deferred basis, right inside your policy.

Why Do I Need Universal Life Insurance?

The reasons for buying universal life insurance are almost as varied as the number of policies available for purchase.

For most people, providing a ready source of funding for grieving loved ones after death is an important consideration. When you die, will your loved ones be able to afford to pay your final expenses and debts and be able to maintain their current standard of living? If the answer is "no", it's time to explore various life insurance options to determine what makes the most sense for your situation.

How Does Universal Life Insurance Work?

Just like other forms of insurance, you'll need to apply for coverage and pay an initial premium. Once your policy is in-force, you'll need to make periodic premium payments to keep your life insurance benefits.

One of the best features of universal life insurance is the flexibility with your premium. You can pay higher premiums to add to your policy's cash value when you're able. Or, if you need to reduce the premium for a period of time, you can make adjustments to the policy to accommodate that.

What are the advantages of Universal Life Insurance?

Universal life insurance is popular for many reasons.

  • Affordability. Universal life insurance costs less than whole-life insurance policies.

  • No-lapse protection. Some types of life insurance may lapse if you don't pay the premium on time. With universal life insurance, your policy includes some protection against lapsing by using the accumulated cash value to keep the policy in-force.

  • Tax-advantaged savings. The cash value component of your universal life insurance policy provides a guaranteed minimum interest rate and offers tax-deferred accumulation.

  • Premium payment flexibility. As your needs change, your universal life insurance policy premium payments and death benefits can be adjusted.

  • Loan and withdrawal features. You may be able to take out loans or withdrawals from the accumulated policy cash value when you need them, which may be an attractive alternative to borrowing from a financial institution.

Do I Qualify?

When you apply for any type of life insurance policy, you'll need to answer questions about your health, including any medical conditions you have been diagnosed with or treated for. You'll also be asked questions about your occupation and lifestyle. The insurance company evaluates this information in determining whether to approve your new insurance policy. Many universal life insurance policies are offered with limited underwriting requirements, meaning you may not need to complete a physical examination as part of the application process.

Is Universal Life Insurance Affordable?

Premiums for universal life insurance policies are typically higher than term insurance, but less expensive than premiums for whole life insurance policies. The price you pay will depend on the face amount of the policy (the amount of the death benefit payable after your death), your age at the time you apply, and your overall health. If you are a non-smoker, your premiums will generally be less expensive than those paid by regular tobacco users.

One of the biggest benefits of universal life insurance is the built-in flexibility when it comes to your premiums. If you experience a temporary financial hardship after your policy has been in force for a certain length of time and have sufficient cash value inside your policy, you may be able to rely on that cash value temporarily to help you keep the policy in force until you can afford to resume the full premium amount again.

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