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Universal Life Insurance

Permanent insurance policies are designed and priced for you to keep over a long period of time.

If you don’t intend to keep the policy for the rest of your life, this may be the wrong type of insurance for you. If so, it may be better to consider term life insurance or return of premium insurance.

The two main types of permanent life insurance are whole life and universal life. These have a feature known as cash value or cash surrender value. Term insurance policies do not have cash values.

Universal life (or whole life) covers an event that’s certain to happen; one’s death, while term covers you for the possibility of you dying during the term period.

Universal Life Insurance policies are interest-sensitive and permit you to adjust the death benefit and/or premium payments, within limits, to fit your situation. Your net premium payments are applied to the accumulation fund, which earns interest. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund. As with Whole Life Insurance, the cash value is yours — you may withdraw it or borrow against it at any time. Or, you can use your cash value to pay premiums. Universal life rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract.

Here’s the difference between Whole Life Insurance and Universal Life Insurance:

  • Whole life guarantees the death benefit for life, guarantees the cash value and guarantees the premium - period.
  • Universal life insurance assumes an interest rate and the cost of insurance and comes up with a projected premium.

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