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universal life insurance quotes Nothing gives an insurance company a bigger black eye than a policy for which a client has paid years of premiums, only to discover that he or she has no insurance. Such a disappointment can occur if a universal life policy "crashes."
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Disappointments and loss of coverage provided by a universal life policy can easily be avoided. You have to understand what the policy is supposed to do, take advantage of the flexible features in a prudent manner, and review the policy annually. If funded properly, universal life should provide life long coverage at a price higher than term but lower than guaranteed whole life.

What it is

Universal life is a flexible policy that combines features of term and whole life. You pay a premium which goes into an account value. The company pays interest on your premium. Each year, the company withdraws the cost of insurance (COI) plus fees. Since the premium will be more than the minimum needed for the COI, the fund or savings portion will grow. In early years, money will go in faster than it goes out. This will create a fund that will more than compensate for the cost of insurance in later years.

The growth of the policy is tied to interest rates. If the economy is prosperous and interest rates are high, the policy will grow quickly. If interest rates drop, and you do not increase your premium, the policy will be exhausted at the end of the time period shown in the "guaranteed" illustration.

Advantages

The premium is usually less than you would pay for whole life.
The accumulated funds are available for withdrawal if you need them.
Every aspect of the policy is flexible. You can change the face value, adjust the premium, add extra funds to increase the savings portion, and even skip a premium payment now and then without having the policy lapse.
The savings feature can build quite rapidly if you put enough into the premium. If the interest rates drop, and you see the cash value decreasing with the increased COI, you can surrender the policy and use the accumulation to fund a single premium fixed annuity. Since annuities are paid directly to your beneficiary, you still have a death benefit, but now you have a tax-deferred account that you can use while you are living—without having to pay a premium.
It is better than term in that it will not expire so long as it has money in it to pay the COI.

Universal "Don'ts"

Don't just pay the minimum premium even though you can get the policy started that way. If you do, it will be a very short term.
Don't take money out without knowing how that will impact the policy as a whole.
Don't ignore your annual statement.
Don't surrender the policy early—as in the first 15 years or you will pay a substantial surrender fee.

Universal "Dos"

Do ask your agent to explain the illustrations and tables in your policy. These will tell you the maximum cost of insurance in any particular year, thereby enabling you to make sure you pay a high enough premium to grow the policy.
Do work with a reputable company that will give you a minimum guaranteed interest rate.
Do allow an agent to explain a universal life policy in detail to prevent surprises and disappointments in later years.

Universal Riders and Waivers

Universal life generally has the same riders and waivers available as term or whole life, but they affect the policy a little differently. Where a whole life policy would have an increased premium for a disability waiver or spouse rider, a universal simply takes more out of the accumulated fund. Illustrations both with and without the riders will help you see what affect such clauses will have on your policy.

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Equity Indexed Universal:

Equity Indexed universals are universals that have largely replaced the old variable universal. Like a standard universal, they have a savings and a life insurance portion. Also, like other universals, you can add extra cash, vary your premium, and take out cash if you need it. However the cash accumulation portion gains interest based on the growth of the S & P 500. You may be able to participate in 65% or more, depending on the company. That means, if the average growth of the S & P over the course of one year from the issue date of your policy is 10%, you will have a 6.5% increase for the year. The interest paid can—and will—go up or down each year, but will never drop below a minimum interest rate. Some companies have a cap on how high your interest can go, while others do not. Unlike a policy that actually purchases stock directly, however, you can never lose your accumulated growth. Even if the market drops, you may gain less interest in a given year, but will never lose what you already have. Furthermore, unlike variable whole life, you can usually either withdraw or borrow the accumulated interest without affecting the face value of the life insurance side.

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