Key Features of Universal Life Insurance
Initiated in the early 1980s, Universal Life Insurance has been largely accepted as a vital part of the life insurance market. A more flexible version of “Whole Life Insurance”, it offers myriads of benefits, including similar ones such as traditional permanent insurance plans and more. This insurance is actually a collaboration of “the building up cash value" element like whole life insurance and "the acquisition of adjustable premiums" element like term life insurance.
Let us discuss some of the key features of Universal Life Insurance.
Flexible Premiums
Instead of being bound to pay a fixed premium schedule for life, Universal Insurance offers significant premium flexibility. You can potentially pay any amount, between the required plan ‘minimum’ to an IRS-imposed ‘maximum’, depending upon your accumulated goals and cash flow. You get the advantage to increase, decrease or even skip premiums, based on factors such as loans, policy surrender value, past premiums and interest rates.
Current Interest Credits
Along with current rate of interest, UN-loaned policy values are credited. The companies offering UL insurance can change the policy values or rate of interest. Even though this rate will never fall below the contractually guaranteed minimum, it actually makes universal life a viable insurance choice.
Current Cost of Insurance
The charge for the insurance death benefit is deducted each month from the policy value. It is calculated on the amount at risk and is based on the policy owner’s gender, age and rate class. The current rate scale will never increase the guaranteed rate scale in the policy contract.
Death Benefit Options
Universal Life Insurance features two distinctive death benefit patterns or options. Under the Increasing Death Benefit Option, the death benefit is the face amount plus the policy value. Even though its long term cost is more due to the enhanced “cost of insurance charge”, still the death benefit is relatively larger. Under the Level Death Benefit option, the death benefit is only the face amount.
As the net amount at risk for the company is the difference between the policy face amount and the policy value, the net amount at risk normally decreases with the increase in policy value. This decrease in the net amount at risk over time may result in lower “cost of insurance” charges in the future.
Let us discuss some of the key features of Universal Life Insurance.
Flexible Premiums
Instead of being bound to pay a fixed premium schedule for life, Universal Insurance offers significant premium flexibility. You can potentially pay any amount, between the required plan ‘minimum’ to an IRS-imposed ‘maximum’, depending upon your accumulated goals and cash flow. You get the advantage to increase, decrease or even skip premiums, based on factors such as loans, policy surrender value, past premiums and interest rates.
Current Interest Credits
Along with current rate of interest, UN-loaned policy values are credited. The companies offering UL insurance can change the policy values or rate of interest. Even though this rate will never fall below the contractually guaranteed minimum, it actually makes universal life a viable insurance choice.
Current Cost of Insurance
The charge for the insurance death benefit is deducted each month from the policy value. It is calculated on the amount at risk and is based on the policy owner’s gender, age and rate class. The current rate scale will never increase the guaranteed rate scale in the policy contract.
Death Benefit Options
Universal Life Insurance features two distinctive death benefit patterns or options. Under the Increasing Death Benefit Option, the death benefit is the face amount plus the policy value. Even though its long term cost is more due to the enhanced “cost of insurance charge”, still the death benefit is relatively larger. Under the Level Death Benefit option, the death benefit is only the face amount.
As the net amount at risk for the company is the difference between the policy face amount and the policy value, the net amount at risk normally decreases with the increase in policy value. This decrease in the net amount at risk over time may result in lower “cost of insurance” charges in the future.
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