Universal life insurance is a hybrid of term and whole life. It will provide a death benefit for as long as the policy is in force just like a whole life policy, and does not terminate in time intervals like a term policy. However, the premiums on Universal Life are not guaranteed. This can mean that as you age, your premiums may increase. For those who start a policy at a younger age, or who over fund a policy, will build cash value that typically can grow faster than a traditional whole life policy. This can play a role in retirement planning for an income stream, or the cash value can help keep the policy in place by helping pay the premiums down. There are different types of Universal life. Two of the most common are, Indexed Universal Life (IUL) & Guaranteed Universal Life (GUL). The difference between these two are how the cash value is held within the policy.
Indexed Universal Life (IUL) Features
- Flexible-Premium – Adjustable Premiums As Life Changes
- Ability to Allocate Where The Cash Value Accumulates I.e. Death Benefit Centric Or Cash Value Accumulation Centric
- Participate in Market Gains.
- Interest Rates Are Determined by Market Conditions But Typically Tied To An Index Such As The Dow, S&P 500, Nasdaq, Etc.
- Living Benefits – Some IUL’s May Have Riders To Help Pay for Long Term Care Provisions
- Guaranteed Death Benefit As Long As Premium Minimums Are Met
Guaranteed Universal Life (GUL) Features
- Lifetime Coverage
- Guaranteed Death Benefit For Life
- Cash Value Builds for the First Years of the Policy Then Can Be Used to Keep Premiums Low Later
- May Have a Return Of Premium Option for The Policy
- Is Designed To Have a Permanent Policy At An Affordable Rate
- Options to Decrease Death Benefit if Premiums Become a Hardship
Choosing the right life insurance can be difficult and oftentimes is one of the most important decisions we will make. Universal life is a great option for some people and knowing what type is best for you is our job. Let us walk you through your options and help you figure out what fits your life.