Universal life insurance policy provides an individual with the death benefits. Also, if you invest your hard earned money in such a policy, it would be a bargain worth making, because it would result in the enhancement of your savings. Death benefit refers to the money that would be received by the beneficiary in case the policyholder dies. In simple terms, it is also referred to as survival benefit. The amount to be paid depends on the type of policy that an individual has attained. Apart from providing death benefit, universal life insurance policy would allow the policy holder to avail a fair saving amount because the savings would be free from tax obligations. Moreover, an individual need not pay a premium for the entire period when the universal life insurance policy is availed. After a particular period, premiums may not be even required to be paid by the policy holder.
People who could benefit from universal life insurance policy:
This policy is a multipurpose policy, as it results in the accumulation of savings by the policy holder. Thus, people who would benefit the most from availing this policy would be the ones who are entering the age group of 70 to 80 years. To be more precise, people in their early 70’s would be the ones who would benefit from this policy. The reason is simple. When people would avail a universal life insurance in their early 70’s, they would get enough time to accumulate their savings. These savings would eventually be transformed into an investment from the policyholder’s point of view.
Important points to be borne in mind:
The first thing that should be kept in mind while availing the universal life insurance policy is that it has to be availed for a long term. The reason for this is that this policy would yield effective returns in a span of around 15 years. This is a long duration until you become eligible for obtaining any return. And thus, the time period for which it is availed should be utilized properly. Another major factor that would help you in gaining access to returns is that you need to employ a reliable and an experienced insurance agent. This is important since you would need to know the concepts behind every policy and also the kind of policy that would suit you in the best manner.
Features of a universal life insurance policy:
- It is similar to a whole life insurance in the manner that it also results in building of savings on a tax deferred basis. A particular portion of the premiums paid by you is being utilized by the insurance company for investment in other options like mortgages and bonds. And the return that is obtained by the company is being credited to the policy without the taxes.
- Also, there is a minimum interest rate applied in the policy, irrespective of the performance of the returns on investments by the insurance company. This is a guaranteed interest rate and is generally fixed at four percent in most of the cases. If the investment is effective and results in fair returns, then the rate of interest that would be applicable on the funds that are accumulated would increase. Thus, you would always receive a certain return on your money.
- There are two options related to the death benefit in a universal life insurance policy. The first option would cost less as it involves payment of the death benefit from the cash value of the policy. Thus, the more the cash value you are to build up, the less is the insurance that would be payable by the company. The second option that is available with you involves payment of the face value, in addition to the accumulated cash value that you have built in years. This is the reason why it costs more than the first option.
- An interesting feature that is being provided by many universal life insurance policies in the today’s time is that they offer you with a guarantee (without any lapse). This guarantee allows you to benefit from the results of the policy till the time you continue paying the minimum prescribed premium. Also, this policy would stay in force till you attain the age of 100.In some cases, this age is extended up to 120 years. Thus a universal life policy provides with a flexible premium payment. This is the reason why it is also referred to as an adjustable life insurance policy. The flexibility and adjustability is being provided in the context of death benefits and premiums, also including the access to the cash value.
- An important facility that is being provided by the universal life insurance policy is that a policy holder can pay premiums depending on the choice. The premium can be the exact premiums on bills, premium that is more than the premiums on bills and the even a premium that is less than the premium on bills. Even, the user can also avail the option of paying no premium. In a conventional life insurance policy, the payment of premiums is to be done as soon as the grace period is over. Thus, a conventional life insurance policy is a more rigid policy.
There are three categories of premiums in a universal life insurance policy, namely the minimum, maximum and the target premiums. The minimum premium, as the name suggests, is the premium which, if paid, would result in keeping alive the policy that is being availed. The target premium would allow the policy to remain in force for the whole lifetime of the policy owner. The largest permissible premium that can be paid for the policy to remain in force is referred to as the maximum premium.
The only disadvantage with which this policy suffers is that if you continue paying very small amount of premium and that too, for a long period, the policy may lapse.