What is Universal Life Insurance the Difference is in the Money

Money the “is” in What is Universal Life Insurance

What is Universal life insurance; it is a type of permanent insurance that  builds up a cash value each month as well as interest. Currently the typical interest rate of this type of life insurance is between two and four percent. This interest rate can be based off of stocks and bonds. A person can use the cash value that this insurance policy holds before their death. Instead of having the benefits paid out only upon death of the insured, as with term insurance, the money can be used for other purposes and used while the person is alive.

Uses for Universal Life Insurance

A policy holder can use the money that they have on their life insurance for a number of different purposes. This money can be used for final expenses and will go to the family after the policy holder has died. This money can be used as a replacement for their income until the dependents are able to adjust to them being gone. While the person is alive this insurance can also be used for a number of different purposes. It can be used to pay off outstanding debt or used to pay off a business when one of the owners has died. It can be used to protect the family from economic loss such as a family owned business closing or the main breadwinner losing their job. This money can be kept as a backup in case something happens and the family need money in order to survive.

Using While Living

Since this insurance policy has a cash value attached to it a person can access it when they need money in their lifetime. Many people do not cash out their entire policy but rather loan money off of it. This money can be repaid over time but there is no penalty if it is not. The interest on the loan must be repaid or it will be taken off of the total cash value. This money can also be used when a person is ready to retire. Money taken from this type of life insurance is considered to be a tax free income. Whatever money that is taken out is deducted from the death benefits. This is a way for a person to prepare for retirement.

Different Ways to Pay for the Policy

This type of life insurance can be paid for in a number of different ways. There is a single premium where a person pays one large upfront payment. A person can also chose to make periodic payments. For example a person can chose to pay the premium over a ten year period. This does not require them to put as large of an amount of out pocket to get the universal insurance coverage. Flexible payment can be made where some of the payment can be higher amounts then others.
Life insurance is important to have so dependents can taken care of upon death as well as final expenses. Now you know the answer to what is universal life insurance in that it allows a person to have a policy that holds a cash value and will provide the financial support in case they are in need of money during their life. This policy can be used as a back up plan due to unexpected life events so a person keep their home and provide for their family.

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