The other day a client of mine asked about Universal Life. After our conversations and e-mails I decided it would be a very good idea to share the information with all of you.
What is Universal Life Insurance?:
Universal life insurance contracts differ from traditional whole life policies by specifically separating and identifying the mortality expense, and cash value parts of the policy. Dividing the policy into these three components allows the insurance company to build a higher degree of flexibility into the contract. This flexibility allows ( with certain limits ) the policy owner to modify the policy face amount or premium, in response to changing needs and circumstances.
Many universal life policies have several different provisions by which the accumulated cash value can be made available to a policy owner during life, without causing the policy to lapse. If a policy is terminated without the insured dying, there are various surrender options for the cash value.
Some Common Uses for Universal Life Insurance:
Universal life policies are useful for policy owners who expect their needs to change over time.
Family Protection: To provide the funds to support surviving spouse and /or minor children, or to pay final bills such as medical or other estate expenses, as well as federal and state death taxes.
Business Planning: Because of it's flexibility, universal life insurance is often uses for many different business purposes, such as insuring key employees, in split dollar insurance arrangements, and funding nonqualified deferred compensation plans. Business continuation planning often involves using universal life as a source of funds for buy-sell agreements.
Accumulation Needs: Some individuals will use the cash value feature of universal life as means of accumulating funds for specific purposes, such as funding college education, or as a supplemental source of retirement funds.
Charitable Gifts: To provide funds for a gift to charity.
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