You need life insurance if somebody will suffer financially when you die.
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If you’re in the market for a life insurance policy with lifelong coverage, universal life insurance might be the right choice for you. Universal life insurance can offer a guaranteed death benefit, allows you to tap into the policy’s cash value, and may give you the flexibility to adjust your premium payments and death benefits.
We’ll walk through what you need to know about universal life insurance and break down the different types of universal life policies. Make sure you’re working with a trusted financial advisor or experienced life insurance agent when considering these policies.
Universal life insurance is a type of permanent life insurance. Unlike term life insurance, which is meant for a specific period, such as 20 years, universal life insurance is in effect for the rest of your life (unless you stop making premium payments).
Some forms of universal life insurance also offer a cash value component. You can take money out of cash value via a withdrawal or loan. When you die, the insurance company will reduce the death benefit payout to your beneficiaries by the amount of any withdrawals or outstanding loans. But for some buyers, accessing cash value is more important than a full payout to beneficiaries later on.
There are a few types of universal life insurance policies and it’s crucial to understand what you’re buying. Their costs and features are quite different.
Typically, guaranteed universal life has the lowest risk, while variable universal life has the most risk because the cash value is tied to stocks and bonds. On the flip side, you can potentially build more cash value with indexed universal life and variable universal life than guaranteed universal life.
If you’re considering a universal life insurance policy, think about how much risk you’re willing to take on. Don’t be sold on promises of big investment gains that might not come true. Be sure to examine the guaranteed portions on the policy illustration and not just the rosy projections.
About Whole Life Insurance