Universal Life Insurance Policy
A universal life insurance policy or ULP is a version of the traditional whole life insurance plan, first offered in the late part of the 20th century. This type of coverage is an accepted and legitimate part of the products offered by most major living indemnity insurers. Many Americans have some sort of life indemnity coverage, often through their work affiliation, though often many opt out in order to put more money in their paychecks. Included in these millions of policies are mostly term types of living indemnity policies, but a few include a universal life insurance policy. Most insurance agents are much happier selling whole and universal policies because of increased commissions, but financial experts do not recommend these policies because they are expensive and do not return enough of one's investment to warrant their purchase.
A universal life insurance policy is a combination of term and whole life indemnity protection that gives the insured the opportunity to move his money around within the plan. Let's take the case of Mr. Always Wrong Weatherman, meteorologist at the local TV station. He has decided to buy a twenty year universal life insurance policy with a face value of $100,000. Since he is fairly young, he will be paying seventy five dollars a month for the coverage. Now the cost of this policy, were it purely term, would be thirteen dollars a month, leaving a sixty two dollar gap. These sixty dollars will be placed each month in a savings plan, held by the indemnity company. In most cases the interest rate will be quite low, but it is often at a variable rate that is probably adjusted daily, weekly, monthly or yearly, depending upon the policy agreement.
The term portion of the plan covers Mr. Weatherman in the event of his death from an irate vacationer no doubt. The policy will pay the face value of the policy for $100,000. But the longer the man lives, the more money will be accruing in this savings account. It is now that this universal life insurance policy begins to show its uniqueness over term and whole life type of indemnity plans. The weatherman Weatherman can first choose where his extra money will be invested, from about a dozen mutual fund type stocks. The actual list of stocks will be dictated by the insurance company but the choices on the list belong to the intrepid meteorologist. This universal life insurance policy does enable the man to move his investments around within the approved list. If the holder decides to out his money into a simple savings account, he may also do that, and should the savings be so low, he may choose to pay for the whole monthly premium out of that savings account.
In most cases, the insurance company will guarantee at minimum return on the savings or investment side of the agreement. That may be in the 2-4% range, again depending on the policy agreement. In most cases, a person with a universal life insurance policy can choose to either have the face value death benefit paid out of the cash reserves of the policy which has a smaller premium or the face value plus the reserves, which costs more each month. And should enough irate vacationers call in to complain about his squirrely forecasts and he gets fired, the guy can actually decrease the death benefit amount, effectively lowering the cost of the universal life policy each month. On the other hand, should payments not be enough to pay the premiums each month and there is no cash reserve to pay them, the coverage will end.
Since money can be borrowed from this type of insurance plan, the agreement does provide some sort of nest egg should rainy day expenses come along, but in most cases, it will take a number of years before a sizable resource can be crafted out of the monthly premium payments. Money placed into the investment side of a universal life insurance policy can be tax-deferred, allowing some relief, but withdrawing in then presents an immediate tax liability. Making sure that there is enough money in an account, watching out for tax-liabilities and keeping track of various performing stocks may be too much for some who just want a simplified insurance plan. Should this be the case, a ULP may not be the answer. So many worries can crowd the minds of all of us, but Jesus said His followers needn't do so. He said, "Seek ye first the kingdom of God and His righteousness and all these things shall be added unto you so take therefore no thought for the morrow, for the morrow shall take thought for the things of itself..." (Matthew 6: 33, 34a, b)
One of the real benefits of a ULP is the fact that it can continue on till a person dies. Should a person need life insurance but purchase a term life insurance plan, there is a good chance it will expire before the insured passes. In that case, the beneficiaries are left with no benefits. As long as a person wants to pay, the ULP can remain in effect; the insuring company can only hope for the lifetime of giant turtle. There are only a few cases in which a UL can be of any real benefit over the purchase of a term policy and solid investment plans. By the time commissions and fees are taken out yearly from the investment side of the ULP, the actual cash value can be diminished significantly.
A universal life insurance policy is a combination of term and whole life indemnity protection that gives the insured the opportunity to move his money around within the plan. Let's take the case of Mr. Always Wrong Weatherman, meteorologist at the local TV station. He has decided to buy a twenty year universal life insurance policy with a face value of $100,000. Since he is fairly young, he will be paying seventy five dollars a month for the coverage. Now the cost of this policy, were it purely term, would be thirteen dollars a month, leaving a sixty two dollar gap. These sixty dollars will be placed each month in a savings plan, held by the indemnity company. In most cases the interest rate will be quite low, but it is often at a variable rate that is probably adjusted daily, weekly, monthly or yearly, depending upon the policy agreement.
The term portion of the plan covers Mr. Weatherman in the event of his death from an irate vacationer no doubt. The policy will pay the face value of the policy for $100,000. But the longer the man lives, the more money will be accruing in this savings account. It is now that this universal life insurance policy begins to show its uniqueness over term and whole life type of indemnity plans. The weatherman Weatherman can first choose where his extra money will be invested, from about a dozen mutual fund type stocks. The actual list of stocks will be dictated by the insurance company but the choices on the list belong to the intrepid meteorologist. This universal life insurance policy does enable the man to move his investments around within the approved list. If the holder decides to out his money into a simple savings account, he may also do that, and should the savings be so low, he may choose to pay for the whole monthly premium out of that savings account.
In most cases, the insurance company will guarantee at minimum return on the savings or investment side of the agreement. That may be in the 2-4% range, again depending on the policy agreement. In most cases, a person with a universal life insurance policy can choose to either have the face value death benefit paid out of the cash reserves of the policy which has a smaller premium or the face value plus the reserves, which costs more each month. And should enough irate vacationers call in to complain about his squirrely forecasts and he gets fired, the guy can actually decrease the death benefit amount, effectively lowering the cost of the universal life policy each month. On the other hand, should payments not be enough to pay the premiums each month and there is no cash reserve to pay them, the coverage will end.
Since money can be borrowed from this type of insurance plan, the agreement does provide some sort of nest egg should rainy day expenses come along, but in most cases, it will take a number of years before a sizable resource can be crafted out of the monthly premium payments. Money placed into the investment side of a universal life insurance policy can be tax-deferred, allowing some relief, but withdrawing in then presents an immediate tax liability. Making sure that there is enough money in an account, watching out for tax-liabilities and keeping track of various performing stocks may be too much for some who just want a simplified insurance plan. Should this be the case, a ULP may not be the answer. So many worries can crowd the minds of all of us, but Jesus said His followers needn't do so. He said, "Seek ye first the kingdom of God and His righteousness and all these things shall be added unto you so take therefore no thought for the morrow, for the morrow shall take thought for the things of itself..." (Matthew 6: 33, 34a, b)
One of the real benefits of a ULP is the fact that it can continue on till a person dies. Should a person need life insurance but purchase a term life insurance plan, there is a good chance it will expire before the insured passes. In that case, the beneficiaries are left with no benefits. As long as a person wants to pay, the ULP can remain in effect; the insuring company can only hope for the lifetime of giant turtle. There are only a few cases in which a UL can be of any real benefit over the purchase of a term policy and solid investment plans. By the time commissions and fees are taken out yearly from the investment side of the ULP, the actual cash value can be diminished significantly.
Universal Life Insurance Policy
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