Most people need some kind of life insurance. While term life insurance is great way to secure insurance coverage, a potential drawback is the very nature of it – it operates for a specified term, and the premium paid does not give the policy any cash value (Note that some do have a return of premium option). For people looking for a permanent life insurance solution that has the potential to grow, there’s universal life insurance.
Wondering how universal life insurance works?
Universal life insurance is permanent insurance – it covers you for life and does not expire at the end of a specified term. As you would expect, when you die, your named beneficiaries receive a guaranteed amount of money (called a death benefit) in the manner directed in your policy. What you might find surprising is that universal life insurance has an actual cash value that grows tax-deferred until funds are withdrawn. In addition, this type of policy allows you to adjust the premium payments, provided the cash value continues to cover any monthly deductions.
Sometimes financial situations require some flexibility. If you need that ability to roll with the changes, universal life insurance products allow for adjustments to the amount and frequency of premium payments.
As the policy’s cash value grows, that growth is tax-deferred. This means you won’t make any tax payments on that growth until withdrawal. The minimum guaranteed rate of interest ensures that the cash value growth won’t dip below a certain level. In short, your policy’s value is protected, even as it provides peace of mind and value to your financial plans.
The choice is yours to make.
No one likes talking about what happens after they pass away, but knowing universal life insurance products provide flexibility, guaranteed coverage, and tax-deferred growth bring peace of mind. Choosing how to best provide for your family is one of the most important decisions you can make.