Universal Life Insurance

What is universal life insurance?
A universal life plan is permanent life insurance that builds cash value while providing flexible life insurance coverage to meet your changing needs. In essence, the premiums of a universal life insurance policy are split in two ways. The premium you pay goes toward covering the cost of the insurance policy and the remaining balance is invested and earns interest on a tax deferred basis. Premium payments are adjustable, as is the amount of insurance coverage you select. Cash value accumulations are tax-deferred and earn a competitive rate of interest.

What is permanent life insurance?
Universal life insurance is a type of permanent life insurance (others include whole life, variable life, and adjustable life). Permanent life insurance covers the entire life of the insured, so long as you continue to pay premiums, as opposed to term, which provides coverage for a specified time period. Permanent life insurance combines death benefits with a savings component. The amount of money that is not used to cover the amount of the insurance is invested by the company and builds up a cash value that may be used in a variety of ways.

You may borrow against a policy's cash value by taking a policy loan. If you don't pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die or from the cash value if you stop paying premiums and take out the remaining cash value. The cash may also be used to increase your retirement income or to help pay for needs such as a child's tuition without canceling the policy. However, to build up this cash, you'll pay higher premiums.

What's the difference between universal life insurance and traditional life insurance?
Universal life gives you the security of traditional life insurance with the added advantage of flexibility. You can choose to change the face amount of your insurance (subject to evidence of insurability), or decrease, skip or even stop your premium payments as long as there is sufficient cash value to cover your premium.

What are the key reasons for purchasing a universal life plan?

• Mortgage protection
• Family protection
• Final expenses
• Medical costs
• College expenses
• Estate taxes
• Living benefits
• Tax-deferred cash value
• Retirement planning