Universal Life Insurance
Universal life insurance policies are a new option and an alternative to the older term life insurance polices that have a fixed period of life cover typically for no longer than 30 years and as the applicants age increases, the amount of the maximum term reduces to 20 or even as little as a maximum of 10 years. Universal life insurance differs from the fixed term in that as it will provide cover until the policy holder dies; it is guaranteed that payouts on the policy will be made regardless of the policy holder’s age, given that the insurance payments are continuously made by the policy holder.
As the insurer is not in the business of losing money, a scheme that on one hand offers value for the policy holder, must on the other hand allows the insurer to invest the premiums paid in a way to earn attractive interest. In the case of fixed term insurance policies, the payout on death is not guaranteed during the life of the policy. In addition, the value of the life insurance fund can vary as a policy for someone who is in their middle age at the peak of their income earning capacity will be needed to fund different requirements from a policy holder whose outgoings and financial commitments will be reduced when they reach pensionable age.
Your life insurance advisor may recommend a combination of policies which can include a whole life and term combination or alternatively a universal life policy. In any case, the premiums to be paid for universal life insurance policy payable up until the age of 120 and with coverage until the age of 120 will be approximately double that for a term insurance policy. Recently, insurance companies have released and promoted fixed rate policies, the rates are guaranteed to be fixed and invariable for the duration of the policy, assuming that inflation will continue at even at modest rates, this is certainly a highly attractive option.
This highly attractive option is different from previous years where the policy holder’s policy plan was valued on its own and its value stayed in force based on its earning and its own guarantees. The difference has been achieved by the application of a new scheme where the death benefits are reinsured by companies called reinsurance companies. They charge and guarantee the payout to the frontline insurance companies using insurance premiums for bulk investments in various financial markets in order to get the maximum returns.
One of the key advantages over whole life insurance is that universal life insurance offers premium flexibility and adjustable life benefits if this option is selected or fixed rate lifetime premiums if this is preferred. There is one key risk that certain universal life policies will lapse if the cash values of the policy can no longer cover the insurance policy administration expenses. The majority of universal life insurance policies have a sliding scale of payout that is as the policy holder gets older, the amount of the payout reduces year on year until it reaches zero. In order to raise the attraction of a universal life policy, a new package has been introduced which is known as a guaranteed universal life policy that for a slightly higher payment of the premium, it offers in return greater payouts on death and higher surrender values if the policy is surrendered.
There are a number of good reasons you could be attracted to universal life insurance. If you are concerned that upon your death, your medical bills or funeral and burial expenses may not be covered, the use of a universal life insurance policy can be a guarantee of peace of mind. If your family and dependents continue to rely on you to support their income, the use of a universal life insurance policy can allow you to continue to provide for them even after your death.
With the explosion of credit and mortgage facilities in the past years, you may have commitments that legally can be passed from the debtors to their descendents. By using universal life insurance, it can cover these debts to avoid financial problems for them to add to their sadness at your passing away.