Universal Life Insurance Policy
A universal life insurance policy or ULP is a version of the traditional whole life insurance plan, first offered in the late part of the 20th century. This type of coverage is an accepted and legitimate part of the products offered by most major living indemnity insurers. Many Americans have some sort of life indemnity coverage, often through their work affiliation, though often many opt out in order to put more money in their paychecks. Included in these millions of policies are mostly term types of living indemnity policies, but a few include a universal life insurance policy. Most insurance agents are much happier selling whole and universal policies because of increased commissions, but financial experts do not recommend these policies because they are expensive and do not return enough of one's investment to warrant their purchase.
A universal life insurance policy is a combination of term and whole life indemnity protection that gives the insured the opportunity to move his money around within the plan. Let's take the case of Mr. Always Wrong Weatherman, meteorologist at the local TV station. He has decided to buy a twenty year universal life insurance policy with a face value of $100,000. Since he is fairly young, he will be paying seventy five dollars a month for the coverage. Now the cost of this policy, were it purely term, would be thirteen dollars a month, leaving a sixty two dollar gap. These sixty dollars will be placed each month in a savings plan, held by the indemnity company. In most cases the interest rate will be quite low, but it is often at a variable rate that is probably adjusted daily, weekly, monthly or yearly, depending upon the policy agreement.
The term portion of the plan covers Mr. Weatherman in the event of his death from an irate vacationer no doubt. The policy will pay the face value of the policy for $100,000. But the longer the man lives, the more money will be accruing in this savings account. It is now that this universal life insurance policy begins to show its uniqueness over term and whole life type of indemnity plans. The weatherman Weatherman can first choose where his extra money will be invested, from about a dozen mutual fund type stocks. The actual list of stocks will be dictated by the insurance company but the choices on the list belong to the intrepid meteorologist. This universal life insurance policy does enable the man to move his investments around within the approved list. If the holder decides to out his money into a simple savings account, he may also do that, and should the savings be so low, he may choose to pay for the whole monthly premium out of that savings account.
In most cases, the insurance company will guarantee at minimum return on the savings or investment side of the agreement. That may be in the 2-4% range, again depending on the policy agreement. In most cases, a person with a universal life insurance policy can choose to either have the face value death benefit paid out of the cash reserves of the policy which has a smaller premium or the face value plus the reserves, which costs more each month. And should enough irate vacationers call in to complain about his squirrely forecasts and he gets fired, the guy can actually decrease the death benefit amount, effectively lowering the cost of the universal life policy each month. On the other hand, should payments not be enough to pay the premiums each month and there is no cash reserve to pay them, the coverage will end.
Since money can be borrowed from this type of insurance plan, the agreement does provide some sort of nest egg should rainy day expenses come along, but in most cases, it will take a number of years before a sizable resource can be crafted out of the monthly premium payments. Money placed into the investment side of a universal life insurance policy can be tax-deferred, allowing some relief, but withdrawing in then presents an immediate tax liability. Making sure that there is enough money in an account, watching out for tax-liabilities and keeping track of various performing stocks may be too much for some who just want a simplified insurance plan. Should this be the case, a ULP may not be the answer. So many worries can crowd the minds of all of us, but Jesus said His followers needn't do so. He said, "Seek ye first the kingdom of God and His righteousness and all these things shall be added unto you so take therefore no thought for the morrow, for the morrow shall take thought for the things of itself..." (Matthew 6: 33, 34a, b)
One of the real benefits of a ULP is the fact that it can continue on till a person dies. Should a person need life insurance but purchase a term life insurance plan, there is a good chance it will expire before the insured passes. In that case, the beneficiaries are left with no benefits. As long as a person wants to pay, the ULP can remain in effect; the insuring company can only hope for the lifetime of giant turtle. There are only a few cases in which a UL can be of any real benefit over the purchase of a term policy and solid investment plans. By the time commissions and fees are taken out yearly from the investment side of the ULP, the actual cash value can be diminished significantly.
Cash Value Life InsuranceThe definition of a cash value life insurance policy is essentially: a plan that accumulates cash over time and can be used as savings plan for retirement. People who are in the need for long term coverage could benefit from such a plan, however, the pros and cons should be weighed before a decision is made. There are advantages to such a plan, for people in certain situations the policy could prove to be more expensive than other plans which offer equal, if not better, coverage. Those who are in need should seek out the assistance of an expert in the field in order to make a wise and informed decision on life insurance, "So teach us to number our days, that we may apply our hearts unto wisdom" (Psalm 90:12).
There are several benefits to cash value life insurance. One benefit is that the money which accumulates is free of tax which means that the policy owner can extract funds at any time they desire to do so. The process works in such a manner that a holder's access to the account is almost unlimited, and if left alone, over time the money saved can be used to put towards a retirement plan. On a surface level such a plan can seem ideal; however there are people who caution against the plans as more often than not a policy holder ends paying a lot more money than is necessary if they choose they no longer desire long term coverage.
One of the main advantages to cash value life insurance is the ability for tax breaks; however, people have a wide array of opportunities available to them which can offer tax breaks in other areas. Other areas included IRAs, employer sponsored savings plans and more. The importance of a non-taxable insurance plan can seem to harbor potential but is not always necessary and should be considered by select individuals. Those who are more likely to consider cash value life insurance policies are those who could use the tax break for reasons such as tax-efficient estate planning. Those who desire to leave a portion of their estate to a loved one or close friend might consider such a plan as a way to avoid significant losses to tax collectors. Occasionally financial advisors will recommend such a policy as a way to save as much as possible.
Other people who might consider the plan are those who do not foresee having enough in a current retirement plan. People who do not have a separate account for a retirement fund should definitely consider a cash value life insurance plan as a way to provide the necessary means so that working forever is not necessary. Other forms of polices have a tendency to be quite expensive for the elderly, and might not provide the necessary funds for a policy holder's spouse in the event of the holder's death. Senior citizens who are not in the best of health should also look into the policies as anything else might not prove as affordable.
There are many people who are of the opinion that cash value life insurance should be avoided as the plans can prove to be a waste of time and effort. There are several disadvantages to the plans. One of the main disadvantages is that they are meant to be kept for the long term, which essentially means the plans could end up being a lot more expensive than necessary. Not only is the coverage expensive over time, but those who desire to cancel the service after a few years can expect to have to pay large fees. People who desire policies for the short term would be much better off investing in term polices.
Those who are in the market for life insurance policies should do sufficient research on the various types available before the decision to purchase. Many people do not have any idea what sorts of policies they are in need of and can easily become confused throughout the process. The Internet can prove to be an excellent source of information for those who desire to learn more about cash value life insurance policies among others. Hundreds of financial institutions have web pages which contain helpful tips and advice for those who are in the midst of the decision process. Most sites offer contact information so that those in need can get in touch with experts in the field. Every individual's situation is unique and everyone has specific needs and desires which financial advisors understand and do what is necessary to ensure that every customer receives quality service that can be trusted.
Life is uncertain and no one is guaranteed a tomorrow. Those who desire to take the necessary steps to protect against an unknown future should look into plans such a cash value life insurance policy. The right coverage can serve to allow the holder a certain peace of mind that can only come with the knowledge that family, friends or loved ones will not be left with a financial burden. Senior citizens who are approaching retirement can benefit from the plans by saving even more funds that can go towards the possible increase of a retirement plan without having to worry about additional taxes. The advantages to such a policy can outweigh the disadvantages depending on individual needs and situations. Preparations against an uncertain future should not be taken for granted and steps can be taken which can serve to make all the difference to those left behind.