Find A Flexible, Affordable Type of Life Insurance For You
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Universal life insurance rates are lower than those of whole life insurance, although both types of life policies provide permanent coverage. While term (temporary) life insurance is the cheapest coverage in the short term, over a lifetime the rates of universal life coverage may be lower than term insurance. The biggest disadvantage of universal life insurance is that it shifts some of the investment risk from the insurance company to the policyholder, unlike whole life insurance which is a virtually risk free investment.
Flexible Premiums
Most universal life policies offer flexible premiums with a minimum and maximum payment. Premiums for whole and term life insurance policies are usually fixed for the life of the policy. Part of the premium payment covers the cost of insurance and part is diverted to an investment component which accrues a cash value. The cash value or equity is invested in financial instruments like stocks and bonds which present a higher risk of loss of value than other types of investments.
Fixed Premiums
If the cash value in a universal life insurance policy reaches zero, the policy ordinarily lapses. Universal policies with a no lapse guarantee have fixed rather than flexible premiums but coverage will not lapse if the cash value reaches zero due to investment failures. No lapse guarantee universal life insurance rates are higher than those of standard universal life, but the guarantee lowers the risk to the insured person and raises the insurer’s exposure.
Single Premium Universal Life
Some universal life policies are paid for at the policy inception with a single, substantial lump sum. The money becomes equity in the policy and premiums for the life insurance are deducted from the cash value. If investments fail to return sufficient interest on the equity, the premiums are deducted from the principal of the equity in the policy. All universal life insurance rates and charges are transparent and policyholders receive statements detailing the costs.
Minimum Interest Guarantees
Universal life policies which guarantee a minimum rate of return have higher rates than other policies. The minimum rate of return guarantee may not guarantee the safety of the cash value investment. In addition to the charge for life insurance, universal life has charges and fees associated with investments which may use the entire guaranteed return and erode the principal in the cash value. Universal life insurance rates are higher for guaranteed return policies.
Permanent Life Insurance As An Investment
The unpredictability of the financial markets in the last few years has banks investing heavily in permanent life insurance. The vast majority of the permanent life insurance market is universal life insurance. Banks consider this investment highly stable, so although some individuals may loss part or all of their investment, the majority of universal life insurance investors have a stable investment which provides life insurance protection.
Life Insurance Quotes
TermLifeInsuranceQuotes123.com provides free and instant life insurance quotes for all types of policies. Consumers simply provide some rating information and the amount of insurance they are seeking and they receive universal, whole, or term life insurance quotes from multiple companies in minutes. Universal life insurance provides permanent life insurance coverage at much lower rates than whole life insurance and the equity in the policy can earn returns in interest and be a tool in financial planning for the future.
Samantha Gregory
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