What's Universal Life Insurance?

Universal life insurance is a form of whole life insurance, but the premiums are more flexible and the benefits are more adjustable. Some insurance experts suggest that only those individuals seeking life insurance coverage into their 70s or beyond should purchase universal life insurance. Before you decide whether or not a universal life insurance policy is right for you, consider the following information.

Flexibility. Universal life insurance is more flexible than whole life insurance. You can choose the amount of coverage you need, as well as adjust your coverage based on your changing insurance needs.

Savings. Universal life insurance has a tax-deferred savings component. Interest is earned at the insurance companys interest rate and credited to your account each month.

Options. Universal life insurance policies offer a variety of options such as family coverage (such as adding a term life insurance rider for your spouse and children), waiver of monthly premiums due to disability, and guaranteed insurability.

Loans and withdrawals. You can take policy loans or make withdrawals from your universal life insurance cash surrender value. However, the amount of unpaid loans and withdrawals at the time of your death will be deducted from the cash benefits your beneficiaries receive. The number of loans and withdrawals you can make each year may vary from company to company, so make sure to ask your life insurance agent.

Charges. You may be charged for making withdrawals or surrendering the account value of your universal life insurance. However, note that if you surrender, you will still get the full amount of the account value minus the charges and any unpaid loans.

Death benefits. Universal life insurance has tax-free death benefits, and most life insurance companies offer more than one option for death benefits. You can choose a policy that allows your beneficiary to get the basic amount of life insurance, or one that provides the amount of life insurance plus the account value.

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