subject: Characteristics of Universal Life Insurance – Understanding the Characteristics of Universal Life Insurance [print this page] Characteristics of Universal Life Insurance Understanding the Characteristics of Universal Life Insurance
Understanding the characteristics of universal life insurance will allow you to make a wise choice when it comes to life insurance selection. One of the first characteristics you need to understand is the cash surrender value. Like many other permanent life policies, this policy gradually builds cash value as the policy owner makes premiums against it. The policy owner can surrender that policy at any point to receive the cash value. That value equals the amount of the investments minus outstanding loans and surrender fees associated with the policy. It is a good option for those that want a safe savings vehicle in addition to death coverage.
Another characteristic is premium flexibility. The minimum required needs to cover the policy fees and deductions. As the investment value of the policy grows, the flexibility increases because that growth can go towards covering the fees and deductions. However, this can lead to a decrease in the overall value of the policy over time. This flexibility usually comes at a higher cost in fees than other permanent life policies doe. Many love the flexibility of making payments when money is available. But, this can lead to funding problems over time if the policy owner does not take care.
A particular characteristic of this type of life insurance is the death benefit options available on different policies. Almost all policies come with a guaranteed death benefit minimum. Some only offer that benefit and no other over the life of the policy. However, many policies offer additional benefits on top of the death benefit. Some policies increase the death benefit with each premium payment. Others increase the death benefit each year the policy remains active. Still others add the cash value of the policy to the minimum death benefit.
These characteristics make these policies popular as investment vehicles. It is important to look over all policies before you make any investments. You should review them with tax and insurance professionals also. This will allow you to find the right policy for your particular needs. Because of the various fees associated with these policies, make sure to keep payment sup in the beginning in order to preserve and grow the death benefit amount as you age. If the policy does not meet investment projections, you may have to pay higher premiums to keep the benefit value maximized. This is something you need to consider when looking at these policies.
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