Monday, April 18, 2011

Universal Life Insurance

Before purchasing a Universal Life insurance policy, be sure you know exactly what you are buying into. Here  is a brief description. Universal Life allows you to select a face amount based on your individual circumstances. Adjustments to the face amount may be requested by you to reflect changes in need. This approach is a measure of actual future earnings and services of a person to provide proper amount of coverage as determined by the value of the individual.  Example, if you make $24,000 per year you cannot take out a $500,000 policy.

Universal Life has divided  the 2 elements of a Whole Life policy, cash value and life insurance. Whole life is a permanent need for protection and builds cash while the face amount decreases. The cash value portion of Universal Life earns interest at the current  rate and the death benefit is in the form of a 1 year renewable term policy. Universal Life offers a flexible premium payment schedule vs Whole Life products.
Premium received by you is placed in the cash value account and interest is credited. Interest is a guaranteed minimum rate. But the cash value is never guaranteed. Reason, you may borrow from the cash value. Additionally, the cash value portion may never be disproportionately larger than the term insurance portion.

Universal Life is usually purchased to provide flexibility not found with Whole Life policies. It adjusts to interest rate changes and allows the owner to make contributions that will increase the cash value. You have a choice of death benefit options. You can choose a higher death benefit by paying the face amount plus the cash value or choose a level death benefit allowing cash value to build. Lastly, you will receive an annual detailed financial statement.

There are many choices of life insurance policies. Don't hesitate to ask questions to determine which policy type will best suit your needs. Make sure the premium schedule is pocket friendly to you. The idea is to have protection for the remainder of your life and to buy while young and  healthy. This will help keep premium affordable.

Good health,
Trisha M. Pacenti RN,BSN