What is universal life insurance?

Universal life insurance is a type of life insurance that offers both protection against death and a savings component. The main advantage of this type of insurance is its flexibility, which allows policyholders to adjust their coverage and premiums to suit their changing needs and circumstances.

The insurance component of a universal life policy provides financial protection to the policyholder’s loved ones in the event of the policyholder’s death. The death benefit, which is the amount of money paid out to the beneficiary upon the policyholder’s death, can be used to cover funeral expenses, outstanding debts, and other financial obligations.

The savings component of a universal life policy allows policyholders to accumulate wealth on a tax-deferred basis. This means that any earnings or interest earned on the savings portion of the policy are not subject to income tax until they are withdrawn. Policyholders can choose to make additional contributions to their policy at any time, allowing them to save more and grow their wealth faster.

Universal insurance is FLEXIBLE

One of the main advantages of universal life insurance is its flexibility in terms of premium payments. Policyholders can choose to pay their premiums on a regular basis, such as monthly or annually, or they can opt to pay additional premiums whenever they have extra funds available. This flexibility allows policyholders to adjust their premium payments to suit their changing financial situation and goals.

For example, let’s say that Maria has a universal life insurance policy with a monthly premium of $100. She has been paying this amount regularly, but recently received a bonus from her employer. Instead of spending the extra money on a new car or a vacation, Maria decides to pay an additional premium of $500 to her universal life insurance policy. This extra payment will not only help her accumulate more savings in her policy, but it will also increase the death benefit of her policy, providing additional financial protection for her loved ones. Because of the flexibility of universal life insurance, Maria is able to make this decision and adjust her premium payments to suit her needs and goals.

Universal insurance is secure

One of the key benefits of universal life insurance is its ability to provide financial security to your loved ones in the event of your death. Unlike other types of savings or investment products, universal life insurance guarantees that your beneficiaries will receive a tax-free payment (known as the death benefit) upon your death. This payment can be used to cover funeral expenses, outstanding debts, and other financial obligations, providing immediate financial support to your loved ones during a difficult time.

For example, let’s say that John has a universal life insurance policy with a death benefit of $500,000. He has been paying his premiums regularly, and has built up a significant amount of savings in his policy over the years. Tragically, John passes away unexpectedly, leaving his wife and two young children behind. Upon his death, his beneficiaries (his wife and children) will be eligible to receive the full $500,000 death benefit from his universal life insurance policy. Because the death benefit is paid out tax-free, John’s family will be able to use this money to cover any immediate expenses and to help them get through this difficult time. The security provided by universal life insurance ensures that John’s family will not have to worry about their financial situation in the wake of his death.

universal insurance is deversified

Another advantage of universal life insurance is the fact that it offers a range of investment options, allowing policyholders to choose the option that best suits their risk tolerance and financial goals. These options range from conservative, low-risk investments to more aggressive, high-risk options, and can help policyholders diversify their tax-sheltered savings portfolio.

For example, let’s say that Sarah has a universal life insurance policy with a savings component. She is a relatively conservative investor and is looking to protect the money she has accumulated in her policy from volatility in the stock market. She decides to invest a portion of her savings in a fixed-income option, such as a bond fund, which offers a guaranteed rate of return but does not offer the same potential for growth as a stock fund. At the same time, she also invests a portion of her savings in a balanced fund, which offers a mix of stocks and bonds and provides a moderate level of risk and potential for growth. By diversifying her investments in this way, Sarah is able to balance her desire for stability and protection with her desire for some potential for growth. The investment options available through universal life insurance allow her to create a diversified portfolio that meets her needs and helps her achieve her financial goals.