Universal Life Insurance (UL) entered life insurance market in early 1980.
The return on this investment is credited to your policy which is tax-deferred. A guaranteed minimum interest rate is applied to policy holder which means no matter how much investment’s perform, this insurance company guarantees a minimum return on the money. If the insurance company does well with the investments, the rate of interest on accumulated cash value tends to increase. Universal Life Insurance allows one to choose from 2 death benefits.
(1)It pays the death benefit out of the policy’s cash value, the more cash value you build up means the company is there for less insurance and so less cost.
(2)It pays the face amount stated in the contract, plus any cash value that may arise which is being accumulated in the years.
Many policies as of now offer a no-lapse guarantee, as long as you pay up the minimum designated premium, the policy will be in force, till the age of 100.As there are 2 sides of coins there are pros and cons of universal life insurance.
Pros:
Universal Life Insurance gives you the flexibility to adjust the death benefit as long as your needs change as well as the flexibility to pay smaller or larger premiums. It is often considered an important parameter for families who have fluctuation in their ability to pay.
Cons:
If your premium payments are very small, the policy would lapse resulting in you leaving the insurance protection. Even if the insurance company does poorly with the investment, the interest return on the cash portion would decrease. In such a case, cash values would probably fall force one to pay up for more premiums in last year.
