Universal life insurance has its benefits, but it also comes with some drawbacks. You can’t exactly compare the different steps of a universal life policy to those of a term policy that you can switch between each time you need life insurance. Still, if you’re looking for an affordable type of life insurance and one that offers lifelong coverage at the same time, then universal life insurance is just what you need. Let’s take a look at some things you should know about this type of life insurance and whether it makes sense for your needs.
What is universal life insurance?
Universal life insurance is a type of insurance that is designed to provide a certain level of coverage for your beneficiaries throughout their lifetimes. This type of coverage is available to individuals as well as couples who are looking to provide a series of benefits to their loved ones. Universal life insurance is a combination of whole life and universal life insurance. The main difference between the two is that while whole life insurance is designed to provide a single lump sum of cash at the time of death, universal life insurance is meant to provide a stream of monthly payments for the rest of your beneficiaries’ lifetimes. So, let’s say that you get a policy of $200,000 with a 10 percent guaranteed increase for the first 5 years. After 5 years, the guaranteed increase rate goes down to 5 percent. You can also cancel the policy anytime during the first 5 years and get back 100 percent of the premium you paid.
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How does universal life insurance work?
With a universal life policy, you pay a series of premiums over the course of your lifetime. Most people choose to pay monthly premiums. The value of your policy is the aggregate amount of all your premiums. You can cash in your policy at any time during your lifetime and get the full amount you paid for it. But, if you die before you cash it in, the beneficiary gets only the amount that is left of your combined premiums and any additional contributions. Keep in mind that if the price of the stock market goes down, the amount that you cash in will be lower too. So, it’s best to choose a conservative rate of return for your insurance policy. You can also choose a guaranteed return, as this will ensure your beneficiaries get a bigger amount if the stock market crashes.
Why would you want universal life insurance?
If you’re looking for affordable life insurance, then universal life may be right for you. One of the biggest advantages of universal life insurance is that it comes with a lifetime of protection. You get your benefits no matter what happens in your health or if you lose your job. And, if you take a reduced salary for a few years, you can still get life insurance. You can also choose to have the money payable to anyone instead of the beneficiary. This protects you if you are the primary breadwinner for your family and want to contribute to the cost of your child’s education. Or, you could make the contribution payable to a charity of your choice.
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Coverage Amounts and Eligibility Criteria for Universal Life Insurance
Life insurance coverage amount – This is the amount you pay towards the total cost of your beneficiaries’ lives after you die. The average coverage amount for a basic universal life insurance is about $200,000. Premium amount – This is the amount paid every month for the duration of the policy. It can range between $1,000 and $100,000. The premium amount is usually what determined the initial value of your policy. Term length – Most universal life policies are issued for a term of 10, 20, or 30 years. You can extend the term of your policy if you want to.
Things to know about purchasing a universal life policy
Cost – You will have to pay a premium every month. Depending on the amount you choose to contribute, the amount can range from $1,000 to $100,000. There may be penalties if you withdraw before the maturity of the policy. Term Length – Your term length will determine how long you get to keep the amount you contribute for. The longest term is 30 years. Minimum required coverage – You can choose to get a policy with a minimum required coverage of as low as $50,000. You may want to go for a higher amount if you’re highly unlikely to ever file for bankruptcy.
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Who Can Get Universal Life Insurance?
Universal life insurance can be offered by a number of different companies. You either purchase it yourself or you can get it through your employer. As mentioned earlier, it can be purchased by both individuals and couples. The minimum age to get a policy of this type is usually at least 18 years.
Should you buy a universal life policy?
If you’re looking for affordable life insurance, then a policy of this type may be worth considering. The biggest disadvantage of universal life insurance is that it has a relatively high mortality rate. This means that the chances of you dying before your beneficiaries are pretty high. If you don’t think you’ll live a long life, then a term policy may make more sense. Or, you can also consider a combination of a term policy and a whole life policy. This will ensure you have some coverage if something happens to you and you can also leave your family with some savings as well.
Limitations of Universal Life Insurance
Universal life insurance comes with a few disadvantages. For one, it has a relatively high mortality rate. This means that the chances of you dying before your beneficiaries are pretty high. Another disadvantage of this type of life insurance is that it has relatively short coverage periods. This means that if something happens to you, your beneficiaries will have to go back to square one and pay another premium to get another period of coverage.
Final Words: Should You Get a Policy of This Type?
Universal life insurance is a great choice for people who want affordable coverage without a lot of hassle. This type of insurance has a relatively high mortality rate and good coverage periods, so it’s unlikely to give you much trouble. You can get a basic policy for $1,000 per month, and it’s easy enough to cancel if something happens. If you meet the eligibility requirements, you can get a policy that covers you for the rest of your life. It’s worth considering if you can get it at a cheap price.
How To get life insurance quotes?
There are several life insurance companies available to get a quote, before you call or go online to compare rates you’ll need to have some information on hand, including:
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your name, address, phone number, and email
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driver license
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social security number
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occupation, salary
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marital status.
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Common health information, weight, height, smoker, non-smoker
Some companies will let you estimate your coverage needs and get a free quote instantly, while others will require you to speak to an agent. You can also learn more about life insurance by going online to do more research on how life insurance works .