Universal Life Insurance (UL) is an opportunity to build a savings/investment account and provide the policyholder with life insurance to last a lifetime. This allows flexibility in what can be done with the savings or investment portion of the premium payment.
Universal life insurance also includes a component of long-term investment because the policyholder builds cash value in the investment portion through the monthly premium.
How Universal Life Insurance Works
When a policyholder pays their periodic premium, a portion is used to pay for the cost of the life insurance to provide the death benefit to your beneficiary. The balance of the premium is invested so it can be used as a cash value account, keeping the premiums affordable.
The idea, that the investment account grows over time and will help pay the insurance premium as the cost of the insurance goes up. The advantage, that the policyholder pays for a predictable number of years and the investment account is eventually large enough to cover the cost of all future premiums. Essentially this allows you to have permanent life insurance coverage without having to keep making continuous payments.
When to Purchase Universal Life
Buying a UL as a young adult, provides a great opportunity to build your financial assets. If you buy a universal life policy in your twenties, you may be guaranteed to have a policy for life. As you eventually settle down, you can use the accumulated cash value for future needs such as down payment on a home or extra retirement funds. Assets in these policies grow tax deferred, and can be taken tax free if done properly.
A UL policy also works very well for people of all ages. Later in life they can provide for final expenses, passing along a legacy for your family, charitable giving to your favorite church or charity, and for business insurance.
Bear in mind, this depends on the type of UL policy you choose and how well the portfolio performs. Purchasing life insurance when you are younger, you will benefit from very affordable rates. The best time to buy a policy is NOW, remember it will be more costly with each birthday.
Using Universal Life as a Wealth Building Strategy
A universal life insurance policy can help establish your wealth, while guaranteeing that you have a solid life insurance policy in place. Insurance like Term Life, which is temporary, will not afford the peace of mind of investing while protecting.
Another leading benefit of this type of insurance is the possibility to not have to pay premiums over an entire lifetime, yet still be insured into retirement. As you get older and accumulate more financial responsibilities, being able to cut down on expenses like life insurance is a distinct advantage.
Make an Informed Decision
It’s always best to become as informed as possible before making a decision of how much life insurance to buy, and what type will work best for you. This is where an independent agent can offer the most affordable solutions based on your situation. Here at MedicareTalk we represent dozens of insurance companies, and will help you find the life insurance product that most appropriately meet your needs.