Whole Life Insurance has been the most popular insurance in the market. When someone thinks of purchasing insurance, they consider buying Whole Life Insurance. But another active player in the insurance world nowadays is the Universal Life (UL) Insurance.
UL is more affordable compared to Whole Life and it offers great deals of benefits that will guarantee the policyholders protection not just for a certain period of time but for a lifetime. Another great thing about it is it provides living benefits. In this article, we will further talk about how Universal Life Insurance works and how you can benefit from it.
Universal Life Insurance combines the affordability of the Term Life Insurance and the life insurance coverage of Whole Life Insurance. It has a cash value and it offers flexibility by making the changes on the policy possible either by the insurance company or the policyholder. However, it doesn’t happen very often that an insurance company will initiate a change in the policy.
How Does Universal Life Insurance Work?
Universal Life insurance policy is known to have a cash value that you can benefit from while you are living. Thus, it is said to be an investment and savings insurance. The premium paid covers the savings portion of the policy as well as the cost of the insurance and administrative costs.
We all know that as we grow older, insurance premiums also go higher. So you need to increase your premiums to keep up with your aging self and still get the protection that you need. With Universal Life, if you are able to save up enough during the early years of your policy, you can use those savings to cover the increase of the premiums. Therefore, you do not need to cope up with the increasing premiums associated with your age.
What Are The Funding Options?
There are three ways to set up your Universal Life Insurance to tailor-fit your needs and maximize your benefits. These are through Minimum Premium, Modal Premium, and Target Premium.
For the Minimum Premium method, the policyholder will only pay the most basic or the least amount of premium to keep the policy. With this, the policyholder is assured of the fixed premium amount in a span of fifteen years. However, premiums will increase after that due to the increasing age of the policyholder.
In Modal Premium, you have the option to pay the premium amount that will sustain your insurance policy and savings up to 100 years old. You might think that you may not reach 100 years old, so how can you benefit from this? Policyholders have the option to withdraw a portion of their savings while they are living or take a loan against their savings. Also, with this type of premium payment, if you will not withdraw from savings, you are guaranteed that the savings amount you have accumulated can be used to pay up your premium up to 121 years old.
The third option is called Target Premium. Taking your age into consideration, this financing option can sustain your insurance policy for up to 30 years. Remember that in each financing option, your age is a great factor in choosing the best option that will give you maximum protection.
Among these three, Modal Premium has been the most bought funding option as this gives the policyholder the premium payment of that of Term Life Insurance and the benefits you get with a Whole Life Insurance. This means that Modal Premium Financing gives the policyholder the maximum savings and insurance protection.
What is a Guarantee Presentation?
Universal Life Insurance is said to be not just an insurance protection but also provides savings to the policyholder. Insurance Professionals will provide their clients with a presentation on how their premiums will grow through the years. You will be shown the guaranteed value of your insurance upon maturity and the non guaranteed as well. The guaranteed illustration will show you the least amount of interest that you can earn from your policy as allowed by the governing law of the land.
A good performing insurance company will not likely give their clients the least interest, but they have to show this illustration to their clients as required by law. Also, this will give clients a bird’s eye view of their policy if the economy goes down.
The non-guaranteed presentation will show you the projections of your premium payments given different interest rates based on the past performance of the insurance company and the current interest rates in the market. This is with the assumption that the policyholder will not make any withdrawal from the savings portion of his premiums or make any changes in his policy.
What are the Pros and Cons of UL Insurance?
One of the great advantages of Universal Life Insurance is its flexibility. Policyholders have the option to make changes to their premium payment in the course of their contracts. They can also make a withdrawal from the savings portion of their account regardless of their reason. An increase or decrease in the death benefit can also be altered as per the request of the policyholder. This flexibility is highly beneficial especially when fortuitous events happen and your financial capacity is compromised. When this happens, you can use up the savings portion of your premium to pay up the insurance costs and related administrative costs while you are recovering from your financial problems.
However, UL’s flexibility when not managed accordingly can be a disadvantage in the long run. It can be tempting to pay the lowest premium at the start of the policy but ends up paying high premiums as you age. Also, with the option to withdraw, some may withdraw too much or make a loan against their savings account and end up lowering their insurance coverage or increasing their insurance premiums.
It is important to always treat your insurance policy as life protection and only make necessary changes when the needs arise. This way, you are guaranteed peace of mind and have insurance that will provide living and death benefits at the most affordable premium payments in the market.
What are Supplementary Benefits to UL Insurance?
Another benefit that you can get from Universal Life Insurance just like any other insurance policy in the market is adding options to your policy. An example of these is Critical Illness Benefit and Accelerated Death Benefit. These are also called Insurance Riders which upgrades the benefits of an insurance policy.
Having riders in your insurance policy will give you extra protection while you are living. If you acquire a grave illness or be diagnosed with a critical illness, these riders will cover the costs of your hospitalization and will in turn give you peace of mind in the associated costs of being sick. Taking advantage of these benefits being offered to your insurance policy will provide better protection to you and your family in any unforeseen circumstances.
For more information about Universal Life Insurance and to get a free and confidential quote, contact the insurance professionals at BBIFinancial at (800) 958-1525 during normal business hours, or contact us through our website at your convenience.