Universal Life Insurance - A Brief Explanation Of Universal Life Insurance
Posted by MyChoices on 12/23/07 in Business
Universal life insurance is a policy in which part of the premiums are used to buy life insurance and part are used to invest in the “cash value” portion of the policy. The premium amount is paid into what is called an “accumulation fund”, which is maintained by the insurance company. This accumulation fund earns varying amounts of interest, according to money market type interest rates. Universal life also has flexible premiums.
Unlike Whole Life insurance, where you make the premium payments and a portion goes into a savings, while the rest goes towards buying life insurance, with Universal life, the insurance company automatically withdraws enough money each year from the savings “fund” in order to buy one year of pure insurance on the insured individual.
Here’s exactly how Universal life insurance works. You pay your premium into the fund. Once per year the insurance company will withdraw money from the fund in order to buy insurance. The type of policy being purchased is called “Annual Renewable Term”. The remainder of the fund is invested in short term interest bearing accounts.
A couple more important notes are that the insured individual has the ability to raise or lower the face value of the policy as long as they can provide current evidence of insurability. Also, unlike Whole Life insurance policies, which mature at age 100 and only pay the face value of the policy, Universal Life policies mature at age 95 and the insurance company pays both the face value AND cash value upon the insured individual’s death or the policy maturity.
Joe Stewart Is A Webmaster And Former Life And Health Insurance Agent. He’s Made Understanding Life Insurance Easy For Others. You Can Get Free Life Insurance Quotes At His Website TheLifeInsuranceGuys.com or by clicking on Universal Life Insurance
Tags: death, policies, policy, premium, premiums, quotes, term life, universal life insurance, whole life
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