Universal Life Insurance

Unlike Term Life Insurance, Universal Life is a type of permanent insurance. It will provide insurance for the duration of the insured's life

Permanent Life Insurance provide life insurance protection for the lifetime of the insured.  A key feature to providing life long protection and keeping the rates inline is that the policy accumulates a cash value. The cash value are funds that can be withdrawn or borrowed and they generally receive favorable tax treatment.

Permanent life insurance products vary. Here are some key points of difference:

• Premium payment flexibility
• The method the cash value is accumulated (stocks, interest, etc)
• Guarantees on the death benefit

The most prominent types of permanent insurance are Universal Life and Whole Life.

Universal Life Insurance was developed to improve upon the Whole Life product and deliver more flexibility.  A notable feature of Universal Life is that the policy owner can adjust the frequency and timing of the premium payments. One can make larger payments, skip payments, make regular payments, etc. The policy will remain in force provided you have sufficiently funded the cost of insurance. 

Premium payments are applied to the policy's cash value, which earns an interest rate set by the carrier. The policy's cash value is determined by deducting from this amount the cost of insurance and administrative costs , typically monthly, from this cash value. The interest rate which helps build the policy's cash value can change but will have a minimum rate guaranteed by the carrier.

Most Universal life policies permit a change to death benefit. However, if the death benefit is increased proof of insurability is generally required. If the cash value increases to a level comparable to the death benefit, the policy's death benefit will increase. This is due to a provision within the tax code.

The cash value may be withdrawn or borrow against. Some policies provide for the withdrawal of part of the cash value without a loan interest penalty. In some case a loan will reduce the death benefit or change other features in the policy

If the policy becomes under funded, the policy will lapse.  The policy can be designed to be guaranteed for a period of time as long as the determined premiums are paid.

Universal Life Insurance can be structured into individual and survivorship (i.e. based on two lives)