Whether you need life insurance or just think it might be a good investment, you probably have a lot of questions. That’s completely understandable! With a variety of coverage options and insurance companies to choose from, it can be a little overwhelming. Doing your research is a good step in the right direction. That’s probably why you’re here, to get some extra information before you make such an important investment.
Of the different types of life insurance, universal is often the one that results in the best long-term results, in the forms of earned interest and flexibility. However, permanent life insurance has higher premiums than term life insurance policies, so not everyone wants to spend the extra cash on a month-to-month basis.
How can you decide what life insurance policy is right for you? First, you should decide if you want term or permanent life insurance. If you know you’d like permanent life insurance, you’ll have to narrow it down between the two major options, universal and whole. To answer some of the questions you might have during this step, we’ll break down universal life insurance and what might draw you into this plan.
What Is Universal Life Insurance?
Universal life insurance is a permanent life insurance coverage option. This means that it will offer lifelong protection to people interested in investing in this policy, as long as they pay their premiums on time. After you die, your benefits will pass along to your beneficiaries; unlike with a term policy, there is no expiration on your coverage. In addition, a savings portion allows you to accumulate cash value over time.
Is It Worth It?
Deciding whether or not universal life insurance is the best option for you involves weighing the pros and cons. Along with access to lifelong protection, what are some other benefits of this policy?
You can withdraw money against your cash value. Part of each premium payment goes toward the death benefit and another portion goes toward your policy’s cash value. Once this money has built up, you have the ability to withdraw against the policy’s cash value in case an emergency occurs.
You can earn interest on your cash value. Be aware, though, as the interest rate changes with the market. Some companies have protection against this, so your interest won’t go down.
Your premiums are flexible. You can lower the costs of your premiums as long as the cash value can cover these extra costs. This is a good option if you ever run into a period in which your budget becomes tight. Permanent life insurance isn’t cheap; your insurance company knows that and wants to make your payments as seamless as possible. Just make sure you don’t use up all of the cash value or your coverage status may be affected if you can no longer pay for your premiums.
You can change the death benefit. Whether you decide to reduce or increase the amount that’s paid to your beneficiaries after your death, you have the option to adjust this benefit.
Universal Life Insurance vs. Whole Life Insurance
You may be wondering what the difference is between the two major forms of permanent life insurance. They have some similarities, such as lifelong coverage and cash value, that stand out against term life insurance. Their difference comes in the form of policy flexibility. With universal life insurance, you can adjust your premiums and death benefit based on your needs during your lifetime. With whole life insurance, the premiums and death benefit are set to a fixed price. Therefore, the former is better for people who want a flexible plan that they can alter over time.
To summarize, universal life insurance could be the best option if you:
1. Like a flexible pay schedule, in which you don’t have a fixed premium.
2. Want cash value that you could use while you’re alive.
3. Think permanent life insurance is the smartest investment for your financial situation.
The best way to make sure you’re getting the best policy is to speak with an insurance agent; it’s his or her job to help match you with a policy based on your needs, so you’ll be in good hands. Speaking it over with your partner is also a good way to make your final decision. It’s an important investment – one of the most important in your life, possibly – so you’ll want to weigh out the options and think it through.