subject: Markets and Uses for Universal Life Insurance [print this page] Markets and Uses for Universal Life Insurance
When people think of life insurance, they generally automatically assume it is only for end of life monetary benefits to their loved ones in the event of their passing. Although the primary purpose of life insurance is to pay out a death benefit to your family, it can be used for other things. In fact, when set up correctly, life insurance can be an investment vehicle that provides money for retirement or to help you achieve other financial goals. Universal life coverage is a very flexible policy that has a number of uses outside just paying out death benefits.
The money invested into a universal life policy can be used in a number of ways. The most common way people use this type of policy is as a guarantee for a loan. Whether you want to start a business, consolidate debts, or make a large purchase, insurance companies and banks are generally willing to allow you to borrow money against the value of your life insurance policy. Since the policy serves as collateral for the loan, you actually may find it easier to borrow money. When you die, the insurance policy will pay off the loan first and then pay the balance to your beneficiaries so you don't have to worry about burdening them with that particular loan after you die.
Universal life insurance policies have uses in the workplace as well. They can be taken out on key employees to minimize the financial impact losing a key person in the business may cause. For example, if the business is built around a particular person like an actor or television personality, the company can collect the amount of money the death of that person would cause the business to lose. This will allow the company to take care of its financial responsibilities while other key personnel tried to determine what to do next.
A key benefit for some people who have high incomes is protection from predatory litigation. This is when a person who practices in a profession known for the high risks of being sued. In some states, a universal life insurance policy is protected by law from judgments and the claims of creditors which makes them a good place to store cash. Additionally, since the money put into a life insurance policy is tax deferred, they make good tax shelters as well as secondary vehicles for retirement income.
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