Universal Life Insurance
What is Universal Life Insurance?
UNIVERSAL LIFE provides flexibility within the contract. You can customize death benefit length of coverage, premium obligation, and cash value accumulation. Many variations of universal life exist within the current market:
Current Assumption Universal Life assumes current interest rates to illustrate cash value accumulation within the contract. The premium and death benefits remain flexible.
No lapse Guarantee/Secondary Guarantee guarantees the death benefit for your lifetime, or a specified period, as long as the minimum premium is paid.
Indexed Universal Life is similar to the Current Assumption except that the cash accumulation within the contract is based upon the performance, if any, of a stock index, such as the S&P 500, or can be based on multiple indices. Premiums and death benefits remain flexible.
Storytime
Imagine fueling up for a road trip. You are at the pump. You know your drive is 200 miles long, and you have enough fuel to get you 50 miles down the road. You also know your vehicle, when fully fueled, can go 300 miles.
You only put enough fuel in your vehicle to reach your destination. Another 150 miles worth of fuel. Your mission is to arrive at your destination with no extra fuel, just enough. That is Universal life insurance, and it is priced and built to do just enough.
Now, imagine along the way you realize there are some hills, so sometimes you are using more fuel than you normally would, and other times you are using less. This is the effect of your cash value which you, the insured, have taken responsibility for.
Near the end of your trip, the “check fuel” light comes on. You have fifty miles until empty. The road sign says you have forty miles until your destination. What do you do? Do you put more money in, or do you roll the dice?
If you are the kind of person who fills up because, “well, I am here, and why not,” then WHOLE life may be a good fit. Or, maybe Universal is still the right call; you just want to “max fund” your policy every year.