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We want you to make the most informed decision possible when planning for your family's financial security. Paying low premiums should not be your only consideration when shopping for insurance. After all, a cheap policy may not adequately protect your family over the long-haul. Buying life insurance, disability insurance, long term care insurance or annuities requires serious decisions and thoughtful planning. Consulting a licensed insurance professional can help ease the burden and provide peace of mind.
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Universal Life (UL), also called "Flexible Premium Adjustable Life Insurance," entered the life insurance market in the early 1980s as a more flexible version of Whole Life Insurance. Like Whole Life, UL features a savings element that grows on a tax-deferred basis. A portion of your premiums are invested by the insurance company in bonds, mortgages and money market funds. The return on the investments is credited to your policy tax-deferred. A guaranteed minimum interest rate applied to the policy (usually around 4%) means that, no matter how the investments perform, the insurance company guarantees a certain minimum return on your money. If the insurance company does well with its investments, the interest rate return on the accumulated cash value will increase. Universal Life allows you to choose from two death benefit options. Option A pays the death benefit out of the policy's cash value; the more cash value you build up means the company is on the hook for less insurance (and therefore costs less). Option B pays the face amount stated in the contract, plus any cash values you accumulated over the years (costs more). Many UL policies today offer a no-lapse guarantee: as long as you pay the minimum designated premium, the policy will stay in force to age 100 (or even to age 120). However, paying the minimum guaranteed premium is rarely sufficient to build up significant cash values.
Quick Fact: Face Amount - The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.
