What Is Universal Life Insurance?
Universal life insurance is a type of permanent life insurance that offers flexible premiums, cash value accumulation, and the potential for long-term tax advantages. IUL provides coverage for the entire life, as opposed to term life which has a limited coverage period, as long as policy is active and premiums paid
One of the key features of IUL is its flexibility. Policyholders can adjust their premium payments, death benefit amounts, and investment options within certain limits. This means that policyholders can tailor the policy to meet their changing needs and budget over time.
Another important aspect of IUL is that it offers cash value build up. A portion of the premium payments goes into an investment account, which earns interest over time. The cash value can be used to pay premiums, as well as to provide a source of savings or investment. Policyholders can borrow against the cash value of universal life policy, but it may reduce death benefit and cash value.
Universal life insurance also has the potential for long-term tax advantages. Cash value of universal life insurance policy grows tax-free until withdrawal. And, the death benefit is usually paid out tax-free to the beneficiaries.
However, one downside of universal life insurance is that it is normally more expensive than term life insurance. Additionally, if the premiums are not paid on time or if the cash value does not grow as expected, the policy could lapse and coverage would be lost.
In summary, universal life insurance is a type of permanent life insurance that offers flexibility, cash value accumulation, and potential tax advantages. Policyholders can adjust their premiums and death benefit amounts, and also invest a portion of their premiums. However, IUL’s are generally more expensive than term life insurance, and policies can lapse if premiums are not paid on time.