Universal Life Insurance is a flexible type of permanent life insurance that combines the protection of term insurance with a savings component that is invested to provide cash value growth. Here are the main features and benefits:
- Flexible Premium Payments: Policyholders can choose to pay the minimum premium to keep the policy in force or pay more to increase the policy’s cash value. This flexibility allows policyholders to adjust their payments according to their financial situation.
- Cash Value Accumulation: The policy has a cash value component that grows based on the policyholder’s investment choices. These choices can include stocks, bonds, or money market funds, providing the potential for cash value appreciation.
- Tax Advantages: The growth of the cash value is typically tax-deferred, meaning policyholders do not pay taxes on the gains while the policy is in force. Taxes may only be due when funds are withdrawn or borrowed against the policy.
- Adjustable Death Benefit: Policyholders can adjust the death benefit amount to meet their changing needs and life circumstances. This flexibility helps the policy adapt to the policyholder’s long-term goals.
- Loan and Withdrawal Features: Policyholders can borrow or withdraw funds from the policy’s cash value as needed. These funds can be used for emergencies, education expenses, or other financial needs. However, withdrawals and loans may affect the policy’s cash value and death benefit.
Universal Life Insurance is suitable for individuals who want long-term protection while also seeking to grow their wealth and manage their financial needs flexibly. When purchasing Universal Life Insurance, policyholders should consider their financial situation and choose the appropriate premium payment plan and investment options.