To put it simply, universal life insurance combines the protection of life insurance and an investment component that allows policyholders to build cash value over time while providing death benefit coverage.
The premiums paid by the policyholder are divided into two portions: one part goes towards the death benefit, while the other part earns interest and builds cash value over time.
The policyholder can increase or decrease the death benefit, adjust the premiums they pay, and even skip premium payments if the cash value in the policy is sufficient to cover the premiums.
This flexibility makes Universal Life Insurance a popular choice among people looking for long-term coverage that can fit their specific needs and requirements.
The cash value growth in the policy is tax-deferred, meaning that the policyholder is not required to pay taxes on the interest earned until they withdraw the funds.
Additionally, the death benefit paid to the policyholder’s beneficiaries is generally tax-free.
Like whole life insurance, universal life insurance policies also have a cash value component, but this cash value is tied to an investment account. The growth of this cash value depends on the performance of these investments.
Because of this configuration, there is more risk involved with universal life insurance. If the investments perform poorly, the cash value and possibly the death benefit could decrease.
This is a great option for people looking for long-term coverage that aligns with their needs. However, it is important to carefully consider the costs involved and whether the policy is compatible with one’s financial goals.
To make an informed decision, be sure to contact our team at Uniserv Insurance Services. Our mission is to help you find the coverage that makes sense for you and your loved ones.
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