UNIVERSAL LIFE
Universal Life is the most flexible type of life insurance policy. The annual premiums and death benefit may be increased or decreased. If there is enough cash value within the policy, you may reduce or even skip an entire premium payment altogether. In this instance, the premium will simply be paid by the cash value within the policy.
Universal Life policies are typically based on current assumptions. In other words, the cost is calculated based on the expectations of the current market economy. For example, a Universal Life policy purchased today may have an interest rate of 4-5.5% on the cash value growth each year. If interest rates increase in the future, the cash value increase will be higher than originally anticipated. As a result, you may decrease your premiums or in some instances stop paying premiums altogether and allow the premium to be paid directly from the cash value. If interest rates decrease over time, your cash value will be lower than anticipated. This typically results in the need to pay additional premiums to fund the policy.
No Lapse Guarantees (NLG) may be added to a Universal life policy. NLG policies are designed to pay the lowest premium to guarantee the death benefit for a specified period of time. Even if interest rates fall and your cash value decreases to zero, you are guaranteed the death benefit as long as you pay the NLG premium on time each year.
Universal Life is the most flexible type of life insurance policy. The annual premiums and death benefit may be increased or decreased. If there is enough cash value within the policy, you may reduce or even skip an entire premium payment altogether. In this instance, the premium will simply be paid by the cash value within the policy.
Universal Life policies are typically based on current assumptions. In other words, the cost is calculated based on the expectations of the current market economy. For example, a Universal Life policy purchased today may have an interest rate of 4-5.5% on the cash value growth each year. If interest rates increase in the future, the cash value increase will be higher than originally anticipated. As a result, you may decrease your premiums or in some instances stop paying premiums altogether and allow the premium to be paid directly from the cash value. If interest rates decrease over time, your cash value will be lower than anticipated. This typically results in the need to pay additional premiums to fund the policy.
No Lapse Guarantees (NLG) may be added to a Universal life policy. NLG policies are designed to pay the lowest premium to guarantee the death benefit for a specified period of time. Even if interest rates fall and your cash value decreases to zero, you are guaranteed the death benefit as long as you pay the NLG premium on time each year.
Why should I choose a Universal Life policy?
Current Assumption and No-Lapse Guarantee Universal Life policies are typically designed to provide permanent life insurance at the most affordable cost. Having a flexible premium that may be changed on an annual basis can be an attractive feature for many people. These types of policies will most likely not build a significant amount of cash value when being compared to a Whole Life or Equity Indexed Universal Life Policy. If your main focus is simply to provide permanent death benefit protection, adding No Lapse Guarantees (NLG) to the policy is a great way to guarantee the death benefit regardless of future interest rates and policy performance.
