Universal Life Insurance Policy refers to a type of permanent life insurance policy. With a universal life policy, the insured is insured for the duration of his or her life so long as they pay the premiums and meet the policy’s other requirements.
There are several types of Universal Life Insurance Policies, and it’s critical to know what you’re getting. Their prices and features are vastly different.
Guaranteed universal life typically has the lowest risk, whereas variable universal life has the highest risk because the cash value is linked to stocks and bonds. On the other hand, indexed universal life and variable universal life have the potential to generate more cash value than guaranteed universal life.
What are the benefits of Universal Life Insurance Policy?
People buy a universal life insurance policy for a variety of reasons, including:
- Lifetime protection – A Universal Life Insurance policy (UL) can provide an income tax-free death benefit from the first day the policy is in effect, helping to protect your family’s financial well-being. 4 And your coverage cannot be canceled as long as you maintain a positive cash value amount.
- Cash value – A UL insurance policy, like a savings account, can accumulate cash value. The cash value of a UL insurance policy earns interest based on the current market or minimum interest rate, whichever is greater. Policyholders may access a portion of the cash value as it accumulates without affecting the guaranteed death benefit. The withdrawals, however, will be taxed.
- A UL insurance policy, like a savings account, can accumulate cash value. The cash value of a UL insurance policy earns interest based on the current market or minimum interest rate, whichever is greater. Policyholders may access a portion of the cash value as it accumulates without affecting the guaranteed death benefit. The withdrawals, however, will be taxed.
- Flexible Premiums – In contrast to whole life insurance policies, which have fixed premiums for the duration of the policy, a UL insurance policy can have variable premiums. Policyholders can make payments in excess of the COI. The excess premium is added to the cash value and compounded. If there is enough cash value, policyholders can skip payments without fear of losing their policy.
- Tax Benefits – The cash value of the policy grows tax-deferred, so no taxes are due on current earnings or interest. Beneficiaries also receive the death benefit tax-free.
Are there any drawbacks to UL policies?
A UL policy can be more complicated than term or even whole life coverage because it provides more options. The policy must be managed: you must decide how much you want to pay in premiums, and with variable UL, you must also make investment decisions. These variables, along with an increased insurance cost, can affect and even detract from the value of your cash value. As a result, you must also monitor your value balance over time: if it falls below zero, your premiums may increase or the policy may lapse.
5 Best Universal Life Insurance
The 5 best universal life insurance companies provide a wide range of policy options with varying limits and premiums. They are trustworthy, have industry experience, and make it simple to contact customer service. They also offer competitive quotes to customers of various ages.
Here are some universal life insurance companies to choose from:
- State Farm – State Farm has an excellent reputation and was ranked first in the J.D. Power 2021 life insurance study. In addition, the company provides a plethora of options for its universal life policies.
- Northwestern Mutual – Northwestern Mutual is a good choice if you want a life insurance policy with strategic investment potential. The company is ideal for those who use life insurance as an investment vehicle or as a tool for estate planning.
- New York Life Insurance – New York Life is our the best for overall value. The company offers a variety of low-cost policy options, many of which include a guaranteed death benefit.
- Mutual of Omaha – In its indexed products, the company provides the greatest amount of flexibility, allowing you to purchase coverage that is tailored to your specific needs.
- Prudential – Prudential’s variable universal life insurance policies have more rider options than any of the other policies we looked at. Prudential also has high ratings for financial strength, so you can rely on this coverage.
There are several benefits to purchasing a universal life insurance policy. These policies can provide both a death benefit and a cash value that grows over time. As a result, universal life insurance can also be used as an investment and estate planning tool. All of the companies on our list of the best universal life insurance are well-known, have extensive industry experience, and have high financial strength ratings. Some businesses provide multiple policies, while others allow you to completely customize your coverage. Some companies have financial planners who can assist you in finding the best policy.
Want to get Universal Life Insurance?
If you believe this type of insurance is right for you, contact an insurance professional or a financial professional near you who has experience with life insurance.