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Universal Life Insurance: All You Should Know in 2020

by Bertha Rugg

What’s Universal Life Insurance? What are the components of Universal Life Insurance cover? Who needs Universal Life Insurance? Well, Universal Life Insurance (sometimes known as UL policy) is a type of coverage that includes lifetime coverage as well as an investment opportunity. With this insurance option, you have a chance of gaining cash value from your cover. Thus, so long as you are paying your premiums in time, you can borrow money and use it for other purposes. So, if you are considering taking this insurance route, stick around. This article is going to delve into the basics—giving you explicit details concerning this insurance option. This will help you make an informed decision so stay with us until the end.

How Does it Work?

Similar to whole life insurance, Universal Life Insurance policies tend to cover more aspects. It’s also important to note that these policies tend to share lots of features with the whole life insurance. Universal Life Insurance policies are more flexible. This is because the premiums paid are divided into two types. Here how it works:

The first premium is based on the policy cost. Here, the beneficially of the policy is guaranteed of receiving money upon your death. The second part involves the additional money—also known as cash value—that acts as a savings account. This gives you an exciting investment option. Further in the article, we are going to present you with several things that are going to provide you with an insight into the world of universal life insurance.

Universal vs. Whole Life Insurance

img source: getinsurancelife.com

Most people will want to compare these two life insurance options. It’s important to note that these two types of insurance, unlike their term counterparts, come with lifetime coverage. It is essential to see which one of these suits your needs the best.

The Differences

Cost of Insurance—Abbreviated as COI, the cost of insurance is one of the biggest differences between these two life insurance options. Whole life insurance is characterized by fixed premiums that are uniform over the whole period. On the other hand, Universal life insurance doesn’t offer a fixed premium. The cost of UL tends to increase with time.

Flexibility—the two types of life insurance covers differ when it comes to flexibility. Whole UL offers more flexibility, the whole life insurance is rigid in nature. This is because whole life insurance comes with fixed premiums. They cannot be changed. Plus, it’s an offense to miss premiums. It might risk your cover. On its part, Universal Life Insurance policies allow you to alter the premiums—depending on your financial position. You can also miss making payments. It won’t risk your cover.

Cash Value– Universal Life Insurance policies are more attractive than its whole life counterpart; thanks to the cash value. While Universal Life Insurance policies offer you a great investment opportunity in which you can reap huge rewards in terms of cash value, whole life insurance is strictly based on covering your life.

Universal Life Insurance and Cash Value

img source: kiplinger.com

When you opt for universal life insurance, you will be presented with two options before you. The first one is that you can move the portion of the investment to the insurance premium when your living conditions change. The second one is that saving can be cashed out. When it comes to the cash value life insurance policy, it can be used as a vessel to save the money for any other type of investment you might want to undergo, like saving for payment for your first home or something similar to it.

When Should You Buy Universal Life Insurance?

Naturally, there is not official the best time to buy universal life insurance. However, from the experience many people have, you will learn that it is the best time to buy it when you are in your twenties or thirties. This looks like the best time for you to build your assets with the highest effectiveness. If you take a look at the basic concept of the universal life insurance, you will see that you will have to wait at least 10 or 15 years before you can shift your investments or cash out. In case you have started to build your assets when you were in your twenties, you can cash out just in time when you have already made your own family and you need additional money for a house or schooling your kids.

Of course, it all depends on the type of insurance you have chosen and how the market performs at that time. One more thing that you should have in mind is that when you are in your twenties, you will have an option of lower rates. Maybe you are not aware of this completely, but this will have a significant impact on the future building of your assets. Maybe you think that insurance is expensive now when you are younger. Just wait to see the level of prices when you are in your older years. One of the recommendations we would like to give you is that you should include universal life insurance in your overall life strategy. Only by doing that you will make the most out of it.

What Do You Need to Be Aware of?

img source: getinsurancelife.com

Maybe you were not aware that a traditional version of universal life insurance was a highly popular option up to two decades ago. In the last twenty years, the unstable financial situation they are not popular anymore. All benefits and advantages that made it popular are now gone. Instead of traditional, today we have the option of using indexed universal life insurance. This is a much safer option nowadays. Before you sign, you need to have enough knowledge about the whole concept of universal life insurance, either traditional or indexed.

The Bottom-Line

Taking good life insurance is good. However, choosing an insurance policy that comes with an investment option can be exciting. And that’s what Universal Life Insurance brings to the table. So, if you love investing and want to insure your life, think about Universal Life Insurance. The above article contains all you should know regarding this insurance option. Familiarize yourself with the basics and make an informed decision. This is highly important. For all your life insurance needs, get help here. We hope that we are going to help you with your future decision. We wish you good luck

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