Permanent Life Insurance
Universal Life Insurance is a type of permanent life insurance. As long as you continue to pay the premiums, it will always be in effect. It offers more flexibility than term in several ways.
Universal has the ability to build cash value in the policy. All premium payments that are above the cost of insurance are credited to the cash value in the policy. That means that it can be structured to be “paid up” after a certain period of time. The cash value earns interest on a tax deferred basis and the death benefit is left to loved ones tax free. The policy owner can also borrow money from the cash value of the policy if needed. These loans, if not paid back, are simply reduced from the death benefit at the time of the insured’s death.
With this type of life insurance, the policy owner may choose a flexible premium to meet their budget and/or choose a flexible death benefit which may be increased or decreased as desired. In general, universal life is more expensive than term, more flexible than term, and less expensive than whole life.
Fixed Index Universal Life Insurance
Fixed Index Universal Life (FIUL) is a specific kind of universal life insurance. It offers death benefit protection, but it accumulates cash value based on positive changes in an external index (S&P 500, for example). That gives it greater accumulation potential than traditional universal life. A cash value floor is built-in so it will not decrease due to market volatility. Thus, when the market goes up, the cash value increases. When the market goes down, the cash value stays flat. With FIUL the cash value is not directly invested in the market.
Whole Life Insurance
Whole Life is also a form of permanent life insurance and tends to be the most expensive. It is similar to universal life but is less flexible. The premiums do not change and it offers a guaranteed interest rate on the cash value. With recent developments to universal life, whole life has become a less attractive option. However, in some circumstances it is still the right choice. Please Contact Us for details and information.