Universal Life Insurance is an excellent financial product and provides a great deal of peace of mind to its policyholders. This is especially true of individuals nearing middle age who have experienced many changes in their lives like career, family responsibilities, etc. Since all these may have taken their toll on their finances, it is not surprising that they are looking for ways to get rid of accumulated interest. Also, since the rates offered by universal life insurance are variable, it becomes all the more critical for an individual to choose a policy that would suit his needs and circumstances best.
There are two main kinds of universal life insurance policy-the variable universal life insurance policy and the traditional permanent coverage policy. In a variable policy, a person is allowed to change the death benefit amount as per his choice up to a certain limit, whereas in a traditional permanent coverage policy there is a fixed benefit amount and you cannot alter it. If you are looking for a cash value policy, you can go for universal policies that come with a higher rate of interest but can be traded with other kinds of insurance products. This way, you can save both time and money, since you can trade-in your universal policy for another better product at any time.
There are two basic kinds of universal life insurance policies-the gap guaranteed and the grace period free of cost. The grace period free of cost policy allows you to take a loan against your present cash balance, without having to pay the same. This would lead to the accumulation of a cash balance which in turn would be available to you in case of any emergency. Gap guaranteed policies also allow you to convert the same into a lump sum.
However, there are many things that you should consider while choosing a universal life insurance policy. One of them is the premium payment option. You should consider the kind of coverage that you need, whether it is in terms of protection or premium payment. For example, there are variable universal life insurance policies and single premium payment universal life policies. You should choose a universal policy according to your age, health status and cash value.
One type of universal life insurance policy is the whole life insurance policy. As the name suggests, this kind of policy guarantees a fixed interest rate on the principal amount for the entire tenure. There are also fixed premiums, which increase with inflation. The flexible premiums allow you to adjust your premiums according to your age and health condition and also according to your financial goals.
Universal whole life insurance policies are usually purchased by those who want a regular income for their family. If you purchase a universal life insurance policy for a good cash value and then you expect a good return, it is called a stable whole life policy. A universal whole life policy has the advantage of tax-deferred growth. Therefore, you have the option of increasing the amount of your premiums as you grow old.
On the other hand, a universal life insurance policy gives you flexibility in terms of premium payment and also in terms of increasing and decreasing your death benefits. This policy is usually purchased by young working people who have an aim of making a long term investment. Another type of permanent life insurance plan is the variable universal life insurance plan. As the name implies, this plan allows you to make adjustments in your premiums and death benefits on a yearly basis.
The two types of permanent life plans are basically the universal and the variable. The universal provides you flexibility in terms of premium payment and also in terms of increasing or decreasing your death benefit and cash values. The variable universal life insurance plan on the other hand provides you with a guaranteed minimum rate of interest, even while you are not working.