Universal life insurance can be viewed as a marriage between life insurance and saving.
You decide how much death benefit you want your universal life policy to have and the frequency of your premium payments.
You also decide how much money should be applied to your saving account and how much to life insurance.
The amount of monthly outlay can vary as long as there is a sufficient amount to take care of the death benefit plus administrative costs.
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How Universal Life Insurance Works
In other words you say to the insurance company, for example, “I have $200.00 per month that I want to put in this policy, I want $250,000 of life insurance and the rest of my monthly payment should go into a savings plan. The insurance company will come back with a quote for your scrutiny and approval.
You can look at it this way…with a universal life policy you get all the benefits of a whole life insurance policy for a lower premium. If the investments of the life insurance company perform well you will be ahead of the game.
A universal life insurance policy offers ample guarantees. The policy incorporates a guaranteed minimum interest rate as well as guaranteed charges. There is usually a minimum guaranteed interest rate of about 4%. The policy is also guaranteed not to lapse as long as the premiums are paid.
This is a great policy to use as the foundation of your life insurance portfolio …especially if you are a young person. Anyone who desires to have some sort of life insurance and also needs to save some money will also find this policy a great buy.
In some instances the insurance company may not perform as anticipated. If this should happen an increased premium may be required by the life insurance company to maintain the death benefit.
Federal income tax is deferred on your universal life insurance policy interest.