Universal life insurance is another type of permanent life insurance coverage.  It is very different from Whole Life Insurance.  The premiums on these types of policies are generally flexible and can change throughout the life of the policy.  It has a cash value component that will build up over time as you make premium payments.  The interest that is credited to the internal cash value varies from policy to policy as well as potentially month to month.  Most policies have a minimum interest rate that they will pay on the cash value.  There are no guarantees in a Universal Life policy except the minimum interest rate.  However there are many different option and riders that can be applied to these policies to give some guarantees.  These policies need to be actively managed so please meet with your agent every year to review these, so together, you can make sure the policy is doing what it is supposed to do for you.  The major benefit of this type of policy versus a Whole Life policy is the opportunity for higher returns on the cash value in the policy.  It is not guaranteed but the potential is there.

Universal Life Insurance

Whole Life Insurance

There are several different types of life insurance policies that offer what are called "Living Benefits".  Some of these benefits are cash value build up inside the policy, accelerated death benefit if you become terminally ill, cash for long term care costs if you need them, or even supplemental retirement income to enjoy your golden years.

A Temporary Solution to a Temporary Problem

Where does Term Insurance work best?

Many people ask what is the right type of life insurance for me to have.  We always answer with the one that is inforce when someone passes away prematurely.  It may seem like a very basic answer but it is the correct answer.  When someone passes away prematurely all life insurance policies whether they are term, whole life or universal life all do the same exact thing.  They pay a tax free lump sum to your beneficiary as long as the premiums were paid with after tax dollars. The real question is, can my life insurance do something for me while I am living?

The answer is an emphatic YES!

Term Life Insurance

  • To pay off debt  like a mortgage or car loan
  • To cover future expenses that will not be incurred after a certain time, ie. college tuition for children
  • To protect your income during your working years
  • To pay off any type of revolving debt that may not be paid off at the time of a premature death, ie. credit cards

Term life insurance is usually the most cost effective way to take care of temporary life insurance needs.  It is designed to only cover you for a specific period of time usually 1, 5, 10, 20, or 30 years or to a specific age like 65.  It usually has the lowest cost because you are "renting" the life insurance for a certain period of time and then it is gone.  There are some term policies out there that have a Return of Premium rider that allows you to get your paid premiums back if you are still alive after the specific term is over.

Whole Life life insurance is exactly that.  Permanent coverage for your whole life.  But it has some great features that allow you to use it while you are living if you need to.  This is a fully guaranteed policy.  What that means is rates are fixed for the life of the product and interest rates are guaranteed for the life of the product.  There is no guess work or surprises with this policy.  The one flexible part of this policy is called dividends.  This is a deposit of money made by the insurance company that goes into your cash value or buys more insurance or some other option you can choose when you buy the policy.  Dividends are not guaranteed but most insurance companies pay a dividend every year.  This policy will build up a pool of money inside of it that can be used by you while you are living.  There are some rules to follow to get the money but your agent will be there to help you if you need the cash.  We have clients that have used this cash for college tuition, down payment on a house, a vacation, long term care costs, or many more  reasons when they need some extra cash.  Now these withdrawals can have long lasting effects on the policy so always consult with your agent before taking money out of a life insurance policy.

Can my life insurance do something for me while I am living?

Life Insurance