Affordable Universal Life Insurance | Nocatee,Fl
Affordable Universal Life Insurance |Nocatee,Fl
Experts agree universal life insurance is the affordable alternative to whole life insurance.
But is universal life right for you, and how does it work?
… or perhaps you’re just looking for the best pricing, or how to save the most money.
We can help!
Definition: What is Universal Life Insurance?
Universal life insurance is a form of permanent life insurance that may provide life insurance protection along with the benefit of flexible premiums, and cash value buildup, similar to the savings element in whole life insurance.
That means when a premium is paid, a portion of the premium pays the actual cost of life insurance, and the remainder of the premium is applied to a sort of built-in savings account in the policy known as the cash value.
The cash value account may earn a fixed interest or be credited with earnings based on the performance of major world indexes such as the S&P 500.
Since cash value is present, the owner may be able to miss payments for a year (or several years). Lastly, universal life policies may provide coverage for life if cash values are high enough to sustain the ongoing cost of insurance.
What Are The Types Of Universal Life Insurance?
Indexed Universal Life
This type of universal life policy is fixed and is for someone who is fine with their returns being attached to a stock index such as the S&P 500.
You are protected with a downside of zero so your money is always protected.
However, the upside has great potential. Just remember that your interest crediting moves with the specific index that your policy is attached to.
Guaranteed Universal Life
This type of universal life insurance is NOT whole life insurance.
However, it has been designed to last for your entire life.
The rates are guaranteed to never increase as long as the premiums are paid and your death benefit will always be in force.
Think of it like a term life insurance policy that lasts for your whole life instead of the normal 10, 15, 20, or 30 year fixed term.
Instead of your rates being attached to specific term lengths, GUL policies are priced to specific ages like (to 90, 94, 100, or 115).
The further out the age, the higher the monthly premium will be, but it’s also a higher probability that the death benefit will pay out.
This is a relatively new type of policy and it is really popular and can save you lots of money, especially for people over the age of 60.
Variable Universal Life
This type of universal life policy allows you to manage different types of mutual funds directly through what’s called “separate accounts” with the cash value that your policy has built..
It’s a type of permanent life insurance and the performance of your variable universal life policy will depend on the performance of the mutual funds you are managing.
Depending on your policy performance some months you could have $0 premium payments while at other times you could owe the max per month permitted by the IRS.
This really can come in handy or be huge mistake, we wouldn’t recommend this type of policy unless you want to be actively involved in your life insurance at the least on a monthly basis.
Universal Life vs. Guaranteed Universal Life:
An Opportunity for Massive Universal Life Savings!
In this post, we’ll be speaking mostly about what is commonly known as “guaranteed universal life insurance.”
… the affordable alternative to whole life insurance.
To be clear, the definition of universal life is VERY different than the definition of guaranteed universal life.
The Inner Workings of Universal Life Insurance
With a universal life insurance policy, the insured is protected with a guaranteed amount of death benefit proceeds. In addition, funds that are in the policy’s savings component are invested to provide the policyholder with cash value build up. Over time, this cash can grow on a tax-deferred basis.
Universal life is set up so that the premium payments are actually more than the cost of the pure insurance expense. This excess amount of premium goes into the cash value portion of the policy.
Each month, the cash value is credited at a certain rate of interest, after which the policy is charged for the cost of insurance. The paid-in funds may also go towards paying for any additional riders that are included on the policy. Often, the interest rate offered by the life insurance company is determined based on a specific financial index.
Universal Life vs. Whole Life:
The big differences come in the way of:
– premium flexibility
– and guaranteed lifetime coverage
Universal Life Insurance Benefits
Universal life can provide you with a variety of different payment options, including a flexibility of changing your death benefits, as well as the potential to accumulate cash value over time. Here’s how:
- Since there is a cash value component, you may be able to skip premium payments as long as the cash value is enough to cover your required expenses for that month
- Some policies may allow you to increase or decrease the death benefit to match your particular circumstances**
- In many cases you may borrow against the cash value that may have accumulated in the policy
- The interest that you may have earned over time accumulates tax-deferred
Whole Life Insurance Benefits
Whole life policies offer you a fixed level premium that won’t increase, the potential to accumulate cash value over time, and a fixed death benefit for the life of the policy. In addition:
- Any cash value growth is tax-deferred (as it is with universal life)
- Whole life may allow you to take loans against the policy
- Whole life offers the ease of budgeting for a regular and consistent premium payment every month
Understanding Key Differences
The flexibility that a universal life policy provides is a key differentiator over whole life. As a result, universal life insurance premiums are typically lower during periods of high interest rates than whole life insurance premiums, often for the same amount of coverage.
Another key difference would be how the interest is paid. While the interest paid on universal life insurance is often adjusted monthly, interest on a whole life insurance policy is normally adjusted annually. This could mean that during periods of rising interest rates, universal life insurance policyholders may see their cash values increase at a rapid rate compared to those in whole life insurance policies.
Some people may prefer the set death benefit, level premiums, and the potential for growth of a whole life policy. However, for those who would prefer to h
Universal vs. Term
The big difference between term life insurance and universal life insurance is that universal life is a permanent policy. Or in other words, its purpose is to provide coverage for your entire life.
In universal life (UL), you apply the same calculations to the premium as you do in term, but instead of taking an average over 10, 20 or 30 years, you pay the average price to insure yourself to age 100.
In addition, term has no cash value. If you cancel a term policy, nothing is returned to you.
The three main ingredients that make up Universal life.
- Death Benefits
You basically have 2 options to choose from when deciding how you want death benefits to be paid to your beneficiary:
Type A Death Benefit or Level Death Benefit: You can choose a level death benefit, that starts off as one amount and stays level for the life of the policy, regardless of cash value. (known as “level death benefit” or “death benefit type A”).
Type B Death Benefit: The other option is a combination of a specific death benefit plus the cash value accumulation feature which builds over the life of the policy.
- The Cash Accumulation Portion
A portion of your premiums is allocated by the insurance company into an interest crediting strategy of your choosing. One popular vehicle, called equity indexed universal life, allows you to participate in the gains of a major stock index, such as the S&P 500, with no risk of principal loss.
You are guaranteed a specific rate of return in many of these strategies, regardless of how well the market does. If the market performs better than the minimum guaranteed amount of investment, you may reap the rewards by benefitting from some portion of the gains, which may be capped at a certain percentage.
- Flexible Premiums
The big difference between universal life insurance and a whole life policy is that with universal life the premiums can be paid as the policyholder desires, as long as sufficient cash values are present to pay off the cost of insurance. With a whole life, you can’t change the premiums to suit your economic situation.
Guaranteed Universal Life Insurance to Age 100
One last note, be sure your plan is guaranteed universal life, meaning as long as you or your cash value pays the minimum premium, the death benefit is guaranteed.
Whatever you do, don’t count on the market to rise or the insurance company to pay you a certain rate, please.
Every universal life illustration will have two columns, one for guaranteed values, and one for “assumed values”. I recommend you only look at the guaranteed column.
For a universal life insurance quote, simply fill out the form on the right side of the page .
The Pros of Universal Life Insurance
If your financial circumstances tend to fluctuate, you can choose to pay either higher or lower premiums. Even if your economic circumstances are rock solid, you can opt to pay a lower premium when the market is performing poorly and up the premium when the market is bullish to make more of your interest crediting strategy.
Interest Strategy Choices:
You aren’t forced to blindly accept where the cash accumulation portion goes, because the insurance company will give you several strategy options. You may pick an equity index strategy, a guaranteed one year term deposit, or a general interest account based on current rates.
You get coverage for your entire life, as long as you keep up with the premiums.
Cash Value Availability:
As you increase the value of the policy over time, you might wonder what happens if you get jammed up financially. Will you have to cancel the policy to get the cash value? No, you can keep the policy in force and your family protected at the same time. You can borrow or even withdraw the cash value you have built up to date and retain not only the unused portion of the cash value but the availability of death benefits.
The Flexibility of the Universal Life Cash Value Feature:
Now let’s cover the cash value aspect of universal life insurance in more detail, because its flexibility is a big advantage. Say your minimum premium is $50 per month. You can send in $50 every month for your whole life and you’ll have your coverage, or you might decide to send in $100. The first $50 goes to paying your insurance costs: cost of insurance, premium fee, administration fee, etc. The other $50 bucks goes into your cash value account.
The cash value account works similarly to a Roth IRA. The idea is to stuff it full of cash and let it accumulate in the early years, so you can pay lower premiums or no premiums in the later policy years. If you’re 20, you might be thinking, “Look, I don’t want to be paying these premiums when I’m 80 years old.”
You don’t have to. What you do is send in additional premiums which earn interest and grow tax deferred in your cash value account. Eventually, you’ll have enough cash in your policy, that at some point you can stop making premium payments. The insurance company will then take the cost of insurance out of your cash value, and as long as there are sufficient funds, you no longer have to make premium payments.
What some people do is take overfunding to the extreme and send in 4-5 times the minimum premium. They do this because of the growth potential and tax advantages of life insurance contracts.
Both the cash value investment portion and the death benefits are tax deferred which means the IRS will not bother you when there is a payout. Just remember, if you borrow against the cash accumulation account you have to take the funds as a loan to enjoy this benefit, which means you will incur interest.
Premiums Are Covered:
If you are financially strapped and can’t make the premium, the insurance company will pay the amount of the premium from the accumulated cash value which may be very convenient.
Considerations Before Purchasing a Universal Life Insurance Policy
Prior to purchasing a universal life insurance policy, there are several things to consider, such as:
- Policy Guarantees– Because universal life insurance typically offers certain guarantees with regard to interest rate, it is important to understand what the minimum – or floor – rate will be, as well as how long the guaranteed interest rate will be in effect.
- Premium Payment– While the premium on a universal life insurance policy can be adjusted, the issuing insurance company will usually require that a minimum premium amount be paid on a regular basis. Therefore, it is important to understand how much premium will be due, as well as how often.
- Cash Value Options– The universal life insurance policy that is chosen should also provide an ample variety of underlying investment options in the cash value component of the policy.
- Fees – There may also be surrender charges or fees involved with a universal life insurance policy – at least for a certain number of years. Therefore, any surrender charges – as well as how long such charges may be in force – should also be noted.
Should you Buy a Universal Life Insurance Policy?
When you’re looking for life insurance, one of the first decisions you need to make is which kind of policy you should buy. When you’re looking at a universal life insurance plan, it can be a confusing process.
Universal life insurance plans are a popular option for anyone who is looking for a flexible life insurance policy. Policyholders have the ability to change their premiums and their coverage amount based on their needs.
If you are looking for cheap life insurance, then universal life insurance is not going to be your best choice. Because of the flexibly and added benefits, it’s going to cost significantly more than a simple term insurance policy. If you’ve looked at the advantages and weight them against the cost of a universal life insurance, but you’ve decided this plan doesn’t work for you, don’t worry. There are still plenty of other options for insurance coverage you can choose from. Keep reading and we will look at other popular choices.
Next Steps for Purchasing Your Universal Life Policy
I hope this article gives you a good overview of universal life insurance. We cannot stress enough the importance of life insurance in your life and Life Exchange Insurance Services can help you choose the right product at the most affordable price possible. Independent agents have access to multiple companies and we know which insurers offer the best rates when it comes to obtaining universal life insurance.
Get your free Universal Life Insurance Quote today and learn more about plan options through Life Exchange Insurance Services. Call us today at (904)203 1763