Universal Life Insurance is a flexible life insurance policy. Universal Life Insurance lets you vary your premium payments. You can also adjust the face amount of your universal life coverage. Increases may require proof that you qualify for the new additional death benefit.

The need for Universal Life Insurance

The need for universal life insurance type contracts became apparent in the early 80's when interest rates were high and traditional whole life insurance policies were limited to lower interest rates of return. Not only did the public want a higher rate of return on their life insurance policies, they also sought greater flexibility. Consumers want the protection provided by traditional whole life insurance, but moreover want:

The flexibility to change the death benefit amounts.

Higher interest rates credited to their policies.

The flexibility to increase or decrease the face amount of the insurance policy.

Cash Values are the total premiums that are paid for universal life insurance less the deductions for expense charges and the cost of insurance. The remaining premiums paid for the universal life insurance go into a policy account that earns interest.

If your universal life yearly premium payment plus the interest your account earns is less than the charges, your universal insurance account value will become lower. If it keeps dropping, eventually your universal life insurance coverage will end. To prevent this, you may need to start making premium payments, or increase your premium payments, or lower your death benefits. Even if there is enough in your universal life insurance account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.

Annual statements are supplied to each universal life insurance policy holder that illustrates the current status of the universal life policy account. As with traditional whole life insurance policies, universal life insurance policies allow for tax-favored cash value buildups and income tax free proceeds at death. Please keep all of these issues in mind when purchasing a universal life insurance policy.