None of us likes to think about our own mortality. But our loved ones mean the world to us, so we should prepare them for life in our absence.
Life insurance is the best way to do that.
Universal Life: What’s Behind It All
Universal life insurance provides death protection for those you care about most, while giving you multiple investment and premium options as your lifestyle and needs change.
Here’s how it works: When you purchase a universal policy, your insurer places a portion of each month’s premium payments, minus the cost of insurance (COI), into an interest-bearing account. Month after month, this “pot” continues to grow, providing monies you may borrow against or cash in.
Premiums are flexible. If, for some reason you can’t make a payment, that month’s premium is taken from the account’s accrued cash value. Your benefits are adjustable and your policy is permanent, which means you’re insured for life.
When you pass away, your designated beneficiary or beneficiaries get whatever cash value remains in your account.
Is It the Right Vehicle for You?
As with any other type of life insurance, this kind of coverage has its advantages and drawbacks. Some of them include:
| Advantages | Drawbacks |
| Flexible premiums, adjustable benefits | Policy lapses if cash value or premium payments are insufficient to cover the cost of insurance |
| Builds cash value, provides a stable investment option | Potential for growth dependent on interest rates |
| Full disclosure of expenses, charges and cost of insurance | Risk for maintenance of death benefits shifts partially to the insured |
As implied above, the flexibility offered by this coverage can be of great value. It offers you the ability to pay less when your budget is stressed, borrowing from your own account if you need to, and pay more when you have extra money to contribute.
If you choose to withdraw money to apply toward other expenses, you pay no interest charges as you would with a whole life policy (though a withdrawal fee may apply).
Although universal life is a type of permanent protection, its premiums are not guaranteed. So to decide if this kind of policy is right for you, talk to a knowledgeable agent, who can advise you further on the risks involved.