Universal Life Insurance–A Useful and Varied Insurance Vehicle

Advisor, Insurance, couple, planning

Universal Life Insurance (UL) combines two basic components—term life insurance and an accumulation fund.

It is a slightly more complicated form of insurance that does have certain benefits in terms of flexible payments, tax benefits and while not for everyone, in the right cases these policies can be very useful.

Generally speaking, Universal Life insurance allows for flexible premiums, meaning you could skip premiums or pay future premiums in advance, within certain limits. This premium flexibility depends largely on the cash value in the policy.

The policy will remain in-force as long as there is enough cash value to cover the monthly deductions for any particular month, but most people don’t fund them to just barely squeak by month-to-month.

These policies can vary greatly in their terms, rules and benefits but we at Lucas Insurance are experts at guiding you to the right fit for your financial needs and future.

Universal Life Insurance–Is It Right for you?

Purchasing a universal life insurance policy requires a bit more knowledge, experience and guidance then more straightforward term, or even whole, insurance policies.

Universal life insurance is permanent insurance that provides lifetime protection and cash value accumulation potential. Changes will happen over the course of your life and universal life insurance can offer you the opportunity to change with it. This product’s flexible design allows you to customize the timing and amount of premium payments to meet your needs now and in the future.

There are many reasons why people choose a universal life insurance policy:

  • Death expenses, such as a funeral, burial, and unpaid medical bills or for income replacement and debt settlement
  • Estate settlement, often there are immediate expenses to be taken care of, such as taxes, and a policy payment can provide the needed cash
  • Business purposes, this could cover or fund certain business transactions, the death of a key executive and even in some tax advantaged bonuses
  • Retirement, in some cases an UL can form an additional part of a retirement plan, especially where other tax deferred plans have been maxed outs an informal funding vehicle where a corporation owns the policy, pays the premiums, receives the benefits, and then uses them to pay, in whole or in part, a contractual promise to pay retirement benefits to a key person, or survivor benefits to the deceased key person’s beneficiaries.
  • A Future Borrowing Source, cash value can often be used to borrow against and may have certain tax benefits
  • Creditor/predator protection, in some states the policies enjoy protection from the claims of creditors, including judgments from frivolous lawsuits.

Before you purchase a universal life insurance policy, you may want to consider the following:

  • The amount and frequency of your premium payments can be adjusted within certain limits.
  • Your policy’s account value grows based on a credited interest rate that can change.
  • You can access money from the policy via withdrawals and loans. However, this will decrease the cash value and death benefit if the amount borrowed is not repaid.