Life can be an amazing experience at times. There are some instances where everything may be just fine and then our life can be on death's door. It is important that everyone has some type of life insurance to protect their family members and loved ones in the event of a sudden or unexpected death. There are a number of life insurance options to choose from including Term Life, Whole Life and Universal Life insurance.
Universal Life insurance is a particular type of life insurance under which an individual is covered for their entire life. Any premium payments that are made by the insured party above and beyond the requirement are added to the cash balance. Typically, an insured party will make an insurance premium payment. The amount will then be credited to their Universal Life insurance policy. However, there will be fees that are deducted from the policy. Administration fees and other fees that are written within the policy will be deducted from the balance each month.
These fees are typically a very small amount and are meant to pay the staff, which runs the policy as well as for claims and customer support.
One of the numerous advantages to owning a Universal Life insurance policy is that it can be used to pay off debt. All Universal Life policies have a cash surrender value. This is the value of the policy if it were to be terminated and a cash benefit paid out to the beneficiary at the present time. Some individuals purchase a Universal Life policy with the idea of saving money. While it is not meant to be a savings account, a Universal Life policy could be used to store money should an individual need to access it at a later date. There are three main types of Universal Life policies: single, fixed and flexible.
Single premium polices used to be more common. They typically involved placing a single large premium into the policy. This was very similar to placing a large amount of money into a bank that was not taxed or subject to any scrutiny. Federal legislators changed the law to ensure that this type of policy was not abused by the wealthy.
Fixed premium policies are where the same amount is paid each and every premium payment until the death benefit is reached. There may be some premium payment periods that are short, while some may be for the length of the policy. It is written differently in each and every policy. These policies are considered to be higher risk due to the fact that they require a certain amount of interest to accrue from the paid premiums. During periods of high interest, there may be problems with the policy. An individual may have to pay more in order to still have the same amount of death benefit.
Flexible premium policies are useful for individuals who want to keep their options open. Payments can be varied in time and amount based upon the policy requirements and the owners choice. There is typically a choice for the level of a death benefit in dollars and an amount of risk, which an individual is willing to take. These types of policies are useful for younger individuals as well as those who follow their insurance accounts closely.
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