Universal Life insurance Policies Offer Great Investment Opportunity, But They Have Their Limitations Too

Few cash value policies are as reasonably priced or as convenient as a universal life insurance is. Mind you, I am referring only to the cash value policies here. A cash value policy is one, in which the premium paid above the cost of insurance is credited to a cash value account within the policy. Such policies are generally valid for the life of the insured and therefore, they can pay the benefit whenever the insured dies. Moreover, if the policyholder feels that he does not need the coverage any longer, he can surrender the policy and receive the cash value amount as return.

Now, to allow investment opportunity along with insurance, the premium you pay is actually divided into three parts. The first part is earmarked as underwriting cost. The second part goes into the insurance account and develops the face value of the policy; the third part of the premium goes into a cash account for investment under experts’ guidance. Interest is credited to this account on regular basis to grow your capital. The cash value accretion offers another benefit. If you default in premium payment, the cost of insurance will debited from this account and so you do not lose your cover in spite of occasional default.

Did you know that a universal life is also termed as ‘flexible premium adjustable life insurance’? Indeed, the two main advantages of the universal life are its premium flexibility and adjustable death benefits. Unlike whole life insurance, the policy does not lapse if you fail to pay the premium; instead, it is debited from the cash value account. Secondly, subject to insurability of the candidate, the death benefit too can be altered at the policyholder’s request. However, there are disadvantages too.

Because of the high cost of a universal life and consequent disadvantages, many people today opt for a pure life insurance policy such as a term life. Its low price allows you to invest separately and in your own way. You now not only have full control of your investment and choose where to invest, but also can withdraw the amount without jeopardizing your insurance protection. However, before you take any step always receive life insurance quote on line from reputed insurers; compare cost vis-à-vis benefits and then decide.

Indeed, today, the popularity of the term life is growing among discerning buyers because it allows them to keep their insurance and investment separate. Since these are pure death benefit and do not require any diversion of funds, you can use such policies to cover all your financial responsibilities such as dependent care, children’s education cost, mortgages, loans, final expenses etc. at a very low rate. Moreover, these policies are valid for a limited period and so you can buy the policy to cover you vulnerable years only. This also is a reason why the policy is so cheap.

Term life policies too can be of various types. Before you make any final choice, you should always go online to receive instant term life insurance quotes and then decide. However, know that, among all, the level term life insurance policies are the most popular. These policies are sold for a specific period and the premium as well as the face value remains fixed for the whole tenure. As opposed to it is the annual renewable term; these policies are sold for a year only, but have renewable clause incorporated in them. Other than these, some other variations are:
• Decreasing term life insurance
• Increasing term life insurance
• Convertible term life insurance
• Return of premium policies
• Life insurance no exam

In decreasing term, the coverage amount keeps on decreasing while the premium remains constant. However because the face value decreases over time, such policies are cheaper than traditional policies. You can buy such a policy to cover your loans and mortgages, but take care to calculate the term correctly. Convertible policies leaves you with the option to convert your term life into a whole life if you so desire without having to provide any proof of insurability.

The no medical life insurance is also unique policy. Such a policy has the shortest possible overwriting process and so if you buy one, you can have instant term life insurance protection, albeit at a higher rate. Because these policies exempts you from taking medical test, they turn out to be rather risky for the insurer; the higher rates are there to compensate such extra risk. If you want the coverage at a reasonable rate, avoid such a policy. Moreover, whatever policy you buy, buy it when you are still young and healthy. What is more, make sure it covers the vulnerable period completely. buying fresh coverage later in life will be anything but cheap.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on term life and online life insurance, visit his site today.
Know ThySelf

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