Universal Life insurance is a type of permanent insurance that is flexible. It can be adjusted to change with ongoing changes in lifestyle and other personal needs or requirements. It provides an initial specified amount of coverage that can be adjusted as required subject to various contractual limitations, depending on the insurer. Premiums can also be adjusted with cash flow changes (minimums and maximums apply).
Deposits can normally be made in excess of the actual cost of the insurance. These excess deposits are invested within the policy, attracting no tax on growth while the funds remain in the policy. There are guidelines relative to the maximum tax-exempt value that can accrue in the policy.
Investment options for surplus cash invested within the policy will vary with each insurance company, but can include a variety of deposit terms or equity based investment options. The short-term performance of a universal life policy may be more dependent on fluctuations in investment returns than other types of permanent insurance (i.e. Whole Life).
- Universal Life should be considered when coverage is required or desired beyond retirement, and there is a cash flow surplus after implementing your personal financial strategy.
- Features of the plan should include guaranteed rates, and disability waiver of premium.
- Choose an insurance company that has good long-term financial stability, competitive rates, flexible contract provisions, and a variety of investment options.
- Universal Life should be considered as an alternative to whole life when flexibility is important.
- Universal Life is normally less cost effective than Whole Life for someone over age of 50. Thus, Whole Life may be considered as an alternative.
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