Universal Life Insurance
Everyone wants to have the best perks as part of their life insurance policy. With universal life (UL) insurance, you can get coverage with low premiums and an accessible investment savings (cash value).
What Is Universal Life?
This flexible option allows policyholders to adjust their death benefit and premium. While most of these policies have flexible-premium options, some ask the policyholders to pay a fixed premium (scheduled fixed premium) or a single premium (lump-sum) option.
Because of this more flexible premium option, these policies are less expensive than whole life policies, but they are similar in other ways. Universal life is a permanent type of life insurance that will never expire. Once the policyholder passes, a death benefit will be issued to the policyholder’s beneficiaries, which can be used to cover funeral expenses, medical bills, and any other costs that might come up or already existed before or after the death of the policyholder.
Components of Universal Life Premiums
The UL insurance premium has two components:
• Cost Of Insurance Amount: COI is the very minimum amount that would be required as a premium payment to keep the policy active. The COI also includes policy administration, mortality charges, and other linked expenses that keep the policy in effect. The policyholder’s age, insured risk amount, and insurability also affect the COI.
• Saving Component (Cash Value): A UL insurance policy can build up cash value, similar to a savings account. Accumulated premiums exceeding the UL insurance cost are collected in the policy’s cash value. With the increasing age of the insured policyholder, the COI will also increase. However, if there is enough accumulated cash value, it will take care of any increases in COI, allowing the policyholder to use the cash value to pay the premium.
Keep in mind that as a UL policyholder, you don’t have any tax implications when you borrow against the collected cash value. However, interest is determined on the loan amount, and a cash surrender fee is also imposed. If there are any unpaid loans, they will decrease the death benefit by that amount and subtract the due interest on the loan from the leftover cash value.
Policyholders who borrow against their insurance policy’s collected cash value don’t face any tax implications.
Need Universal Life Insurance? Call Family First Life Insurance!
I understand how important it is that you choose the right life insurance policy. That’s why Family First Life Insurance, LLC will help you during the decision-making process so you can compare your options and choose the right policy.
It is my priority to keep you educated on all your life insurance options, including universal life insurance. If you have any questions about any life insurance policy or would like a free quote, just give me a call today!
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