What Is a Universal Life Insurance Policy?
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A universal life insurance policy is a variation of whole life. That is, it consists of a face value like any insurance policy, and then it also has a built in cash value. This type of life insurance may also be called a "Flexible Premium Adjustable Life Insurance."
The difference between standard whole life and a universal life insurance policy is that the universal life policy owner is able to make adjustments between the three features – the amount of the face value, the benefit, and the amount of the premiums. This feature enables the owner to be able to make adjustments for when the market values may not be performing well, or, when not as much life insurance is needed and a larger portion of the premium can be put into the investment portion of the policy. This can also work well if the owner has fluctuations with income because it will allow smaller premium payments, but a minimum is required to keep the policy functional.
A universal life insurance policy will usually have a guaranteed minimum interest rate on the cash value portion of the policy. This rate is often around four percent, but can go higher if the economy and the company performs well in that year.
Owners may have a choice as to whether they want to receive the death benefit from the cash value, or if they want to get the death benefit plus the cash value. This last option will cost considerably more. Before buying, always shop around for best price and check out the company, too.
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