What is Universal Life (UL) Insurance?
Universal Life Insurance is a special type of insurance that is meant to act as both a permanent life insurance policy, as well as an investment tool for the policyholder. It is more flexible than many other forms of life insurance, since the policyholder is able to change the term and specific attributes of their insurance as their life circumstances change. Essentially, UL insurance can be thought of as regular life insurance with a special investment tool attached.
Who is it for and How does it Work?
UL insurance is for anyone who wants a regular life insurance policy. Workplaces often offer a UL policy in place of their standard life insurance policies for their employees to purchase through payroll deductions.
How the policy works is much different from many other forms of life insurance. When premiums are paid, they are pooled together in a sort of cash value fund for the policyholder. The policyholder is able to change around their interest and principal amounts if they want in order to use the interest to pay future premiums. They can also change things around so that they pay higher premiums and accumulate more interest for their policy’s cash value. This policy is essentially a cash value investment that, if the policyholder cancels the policy, could have grown into a large investment.
What Can It All Be Used For?
UL insurance policies cover many life events. The most often used benefits are the ability to pay funeral expenses and the ability to replace income for dependents and family after death. The cash value of the policy is also used as a hedging instrument, enabling it to be used as collateral, as well as capital for certain investments.
The Major Benefits of UL
UL insurance is very similar to many other types of life insurance. UL has a very flexible structure, which most policyholders like. Policy information and attributes can be changed in the middle of the policy, offering flexibility and a recognition that lives change in the blink of an eye. The cash value component of the policy is also a great benefit, since it can be used to pay off premiums, as well as merely collect interest and raise the value of the policy.