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Details of the Universal Life Insurance

Details of the Universal Life Insurance

Details of the Universal Life Insurance

A universal life insurance policy is a type of cash value insurance combining term insurance with a tax deferred savings feature in a package where both the premiums and benefits are flexible. Premiums can vary between the insurance company's minimum and the IRS's maximum set values. This type of insurance is much more flexible than whole life insurance. It allows you to vary the premium payments and the level of protection received.

The insurance starts out with a dictated premium set by the insurance company. After the company subtracts expenses and mortality charges to pay for the life insurance protection the remainder of the premium plus interest is added to the cash value. The premium can then be increased or decreased by the policyholder and adjustments will increase or decrease the cash value of the policy. The death benefit can also be adjusted by the policyholder. A universal life policy is comparable to a term insurance policy except the additional premium goes towards the face value of the insurance.

Funds in this type of insurance are broken down into three separate areas including: mortality charges or term insurance, the cash value or savings and the administration expenses. This arrangement allows the policyholder flexibility to vary premium payments. If a payment is skipped or a payment is not large enough to cover the mortality charges and administrative expenses the shorted amount will be subtracted from the cash value of the insurance. If the cash value is not enough to cover the expenses than the insurance policy will lapse. If a large payment is made, in an amount greater than what is needed to cover the mortality and administrative charges, than the extra payment will be credited to the cash value or savings on the account.

As with many life insurance policies a loan can be taken out, though this can cause the future face value of the loan to short fall expectations, it can increase premiums and will shorten the life of the policy. Payments with interest are made to the insurance company to repay the loan. A withdrawal can also be made which allows the policy holder to with draw the face value of the insurance and will include sales charges and any other fees initially set by the insurance company. Withdrawals can be tax free however the death benefit and the future face value will be lowered in doing so. Do you know about Aviva Insurance. Also make sure to visit Buy AMP Life Cover.

There are a few shortcomings to the universal life insurance. Returns can fluctuate dramatically. The flexibility to pass on premium payments is very tempting to many policyholders which can result in a lapse of the polity. Finally, given fluctuating returns and high expense charges, the anticipated savings may not be as much as expected.

The value of universal life is its flexibility which can appeal to a person with uneven and fluctuating income, where a premium payment may be skipped once or twice. Policy holders should take a cautious approach since administrative fees of the policy can be very expensive. Insurance policies should be purchased mainly for their protection.
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Details of the Universal Life Insurance Washington