Who doesn’t want to safeguard their family from financial insecurity in case of an unexpected disaster? Well, nothing is better to guarantee your household fiscal security than universal life insurance.
Universal life offers coverage for lifelong and provides flexibility and choices for paying premiums and cash value investment. Though it’s an amazing life insurance, it works better if your financial condition meets certain conditions.
Universal life insurance has many advantages and some disadvantages too. In this article, we try to make arguments for both sides. As you are going to read, you can decide for yourself whether it is suitable for you or not.
What Is Universal Life Insurance?
Universal life insurance is a hybrid permanent life insurance that combines components of term life insurance with an investment savings element.
The most universal life insurance policy is notable for its flexible premium option. The fantastic part of this insurance is to build savings and at the same time, provide you with a general life insurance policy.
Universal Life Insurance Advantages:
Universal life insurance is famous for its flexible policy. If you don’t have a fixed income, I think there is no better life insurance policy for you than a universal life. Even if your income is fixed, you can choose to pay a low premium fee if the market is down and switch to a high premium when the market is in its peak.
Certain Interest Rate
Another lucrative part of this insurance is its cash value. The cash value is guaranteed to increase at a specific interest rate and will never go below from a certain predefined level. It will keep growing unless you draw down the cash to pay for premium or for some other reasons.
Several Insurance Options
There are mainly three options open for universal life insurance- variable, indexed, and guaranteed.
Variable universal life offers you to manage various types of mutual funds via separate accounts.
Index universal life insurance presents a permanent death benefit that is not subjected to the death tax. As it is not invested in the stock market, it is less risky.
Guaranteed universal life offers a constant premium for its policyholder. It eliminates the excessive financial burden in older age.
Several Investment Strategy Options
For the cash accumulation component, you can choose several investment options. The policy provider will let you select a suitable investment option. Based on the currently available rates, you can select equity index, general interest account, or term deposits.
Premiums Are Covered
If you are unable to pay your premium for some reason, at least in universal life, you don’t have to worry. Your premium will be paid from the cash value.
Universal Life Insurance Disadvantages:
If you compare it to the term life insurance, it is costly. To be exact, it is three or four times more expensive than term life. You have to bear higher administration costs for this life insurance too.
Lest Cash Value Must Be Repaid
You can pay your premium with your cash value. But the downside is you have to repay it. Even in some cases, the policyholder may demand interest from you. It may also decrease your death benefits.
Building Up Cash Value Takes Time
As amazing as it sounds, the cash value needs a significant amount of time to build up. It takes almost 5 or 10 years to build up an amount to use as a beneficial component. If you don’t have enough time, you should choose term life insurance.
Life insurance works better if you choose the right one. You have to consider your current financial condition, marital status, savings, your children’s number, and many other things before adopting life insurance.