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Universal Life Insurance: Something to show for your money

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What is Universal Life Insurance?  Universal life insurance is a type of permanent insurance that can be funded with a premium slightly higher than a term policy. The insurance works on the basis of a savings component from which the cost of insurance is paid. As long as there is enough money in the savings account to pay the cost of insurance and annual fees, the policy continues in force. Unlike TERM insurance, the policy is not designed to be dropped at the end of the initial time period, and the premium does not need to increase every year, depending on how you choose to fund it.

Benefits of Universal Life:  Of course most people prefer having a policy that does not have premium increases in later years. A universal life is flexible, meaning that you can change your face value, your premium, and the company can change the interest it pays on the savings based on the economy at the time. The company can also change the cost of insurance based on a national cost chart, but must disclose the maximum your policy could ever cost. The way these flexible features work is that you are able to choose your premium providing you pay at least the minimum. If, however, you pay a target premium instead, you can set up the policy so that your premium will never need to be increased, and the policy will build a substantial savings account which will give you numerous additional choices in later life. (Companies use the terms “target” and “modal” in different ways so be sure you know how your premium is classified.)

Best Universal Life Insurance Broker: Due to the flexible nature of universal life and the fact that insurance language is not completely standardized from one company to another, you will find that this type of insurance is not a “do-it-yourself” product. In fact, most policies sold through the mail or over the internet are actually term or some form of modified whole life; universal life has additional disclosures which explain the savings side and illustrate the way the policy will perform at several different interest rates. Those not educated in insurance terminology sometimes misunderstand these disclosures and end up paying either too much or too little for their insurance. Therefore, most companies require that you purchase Universal life through a broker or agent. 

Occasionally you will find someone who will advertise as a discount life insurance  broker. Don’t be deceived by these tactics as life insurance discounts are quite specific and apply to an entire class of people, such as an employee group. Some companies will charge a slightly lower premium for allowing automatic bank draft or for paying it annually. Certain situations that seem like a discount but are actually standard practice are lower premiums for non-smokers and for those in good health. If you are in exceptionally good health, and the company offers it, it is possible to purchase a “preferred plus” policy which does give you a lower premium than a standard policy. Females and non-smokers generally have a lower “standard” rate, but this is not actually a discount from those who do smoke or who have health issues. Rather, those who have certain types of problems are “rated up” or given a “substandard” premium which is always higher than a standard premium. In fact, “standard smoker” will be a higher premium than a “standard non-smoker” regardless of other health issues.


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