Universal Life Insurance Company Quote &
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Universal Life Insurance
Universal life insurance is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed minimum but usually is higher than that minimum. Mortality charges and administrative costs are charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any.
The universal life policy addresses the perceived disadvantages of whole life. Premiums are flexible. The internal rate of return is usually higher because it moves with the financial markets. Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. And universal life has a more flexible death benefit because the owner can select one of two death benefit options. Option A pays the face amount at death and Option B pays the face amount plus the cash value.
But universal life has its own disadvantages which stem primarily from this flexibility. The policy lacks the fundamental guarantee that the policy will be in force unless sufficient premiums have been paid and cash values are not guaranteed.
A type of universal life is called variable universal life in which the rate of return on the cash account is related to stock or bond market fluctuations.
Whole Life Insurance Good Investment
Whole life insurance provides for
a set face amount, a level premium, and a cash value table included
in the policy guaranteed by the company. The primary advantages
of whole life are guaranteed death benefits, guaranteed cash values,
fixed and known annual premiums, and mortality and expense charges
will not reduce the cash value shown in the policy. The primary
disadvantages of whole life are premium inflexibility, death benefit
inflexibility, cash value accessibility is limited, and the internal
rate of return in the policy may not be competitive in with other
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