Universal life insurance is one of the newer types of life insurance you can purchase. In some ways, it is similar to whole life insurance because it builds cash value and potentially offers protection for your whole lifetime, unlike term life insurance, which typically ends after 20 or 30 years. Universal life insurance offers many potential benefits, but it can be a little more complicated and confusing than other types, so it is important to discuss the details with your insurance agent before committing to a universal life insurance policy.
Here are some of the potential benefits of universal life insurance:
• Flexibility: Most life insurance policies cannot be changed after the policy takes effect, but universal life insurance is different. If your life’s circumstances change, you can change the premiums you pay and the face amount of the policy’s death benefit.
• Long-term protection: This type of insurance is designed to stay with you for the long-term, as long at the premiums are paid. You should be aware that it is typical for the premiums to rise over time, unlike whole life policies where the premium is level until the policy is paid.
• Builds cash value: The cash value that this type of policy accrues is separate from the potential death benefit. It is guaranteed to grow each year with a minimum annual interest rate, but it has the potential to grow even more depending on stock market and investment circumstances. At the maturity date of the policy, which is usually set between age 85 and 121, you would get paid the cash value and the policy will end. You can pull out cash value early if you need to for unexpected expenses, but this can affect your taxes. You can also use the cash value as collateral for a loan.
To learn more about universal life insurance, talk to your trusted insurance agent.