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Universal life insurance is a type of whole life insurance. Universal life differs from other whole life policies in that it allows the policy owner to vary, with limits, the amount and timing of premium payments and the death benefits. These changes can be made while the policy is in effect.
Interest Rates and how they affect Universal Life Policies
Unlike whole life, this is an interest rate driven policy, which normally pays a minimum guaranteed interest of 4% to 4.5%. If the interest rates stay low, additional premiums may have to be paid to avoid lapse in coverage.
Universal Cash Value Options
It is not guaranteed, but it is possible the cash value in a universal life insurance policy could grow faster than is needed to pay the cost of insurance. You can generally choose how that money be used:
- Leave it there and accumulate interest. Taxes won't be due until you take it in cash, and future premiums may be reduced.
- Take it out in cash. The funds would be treated as taxable income and lower the policy's cash value.
Universal Death Benefit Choices
- Option A: Level death benefit is equal to the universal policy's face amount.
- Option B: Increasing death benefit is equal to the universal policy's face amount plus the policy's account value. Premiums will be higher for an Option B plan.
| Different types of Permanent products. |
Whole Life Insurance
Survivorship Life Insurance
Joint Whole Life Insurance
Universal Life Insurance
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