Whole Life Insurance Florida

Posts Tagged ‘universal life insurance policy’

What is universal life insurance? And is it right for you? A lot of brokers will push the universal life insurance as an investment for the future, a lot like mutual funds, or a retirement savings plan would be. However, this is not what universal insurance is, it’s a bit more complicated than that.

With universal life insurance, there are 2 big factors to think about:

• Cost of Insurance (COI):  This is how much the insurance costs the company, not necessarily how much it will cost you though. Those are 2 different types of costs.
• Value of Premium:  This is how much you are paying into the the policy each and every month.

Universal Life Insurance Policy Value

This is how the value of the policy is determined:

They take the value of the premium you are paying every month, and subtract the cost of insurance from that value. Then as each  month you are credited interest, which is determined by the insurance company to the account.

So over time, your policy will increase in value, the more you over pay the cost of the insurance.

There are a few things you can do with a universal insurance policy:

• Take a loan out on it; as long as this clause was added to the policy, and you will have to pay interest on that loan, just like any other loan, because the company is no longer getting any benefit from that money, as they are no longer holding it
• Some forms of universal insurance come with an option to withdraw money, instead of taking out a loan, but it still is not free, and may increase the amount of premiums you pay, because they may see to increase the cost of the insurance until the money has been replaced.

What is Universal Life Insurance?

It’s a policy that acts like a mutual fund, but is not considered part of your investment portfolio. It grows over time, just like any other investment. And, if you do not cash it in before your death, your beneficiary may be able to receive the policy as a tax free, since it was never considered tax deferred in the first place.

If you’ve read any of the pages on whole life insurance, you’ll recognize that a whole life insurance policy and a universal life insurance policy are very similar.  Still, they do have differences.

So, the choice is yours, there are many types of policies out there, and many different universal types as well. Remember one thing though, always go into it with as much knowledge as you can get; this way, you won’t buy a policy that isn’t right for you.