Life Insurance

Universal Life Insurance

Universal life insurance is a "flexible premium, adjustable life insurance policy" and is characterized mainly by its flexibility in regard to premium payments, death benefits and access to the policy's cash value. Unlike whole life insurance which requires the regular payment of billed premiums, with universal life insurance the policyholder can pay more or less than the billed premiums - or even no premium at all! Premiums also may be remitted at non-scheduled times.

The emergence of universal life insurance marked a major departure from traditional fixed premium whole life insurance products that do not have flexibility with regard to premium payments, death benefits and access to the cash value. For instance, when a reduction in face amount on a whole life policy is desired, this must be done through a partial surrender of the policy potentially resulting in the release of cash value and income tax liability for the policyholder.

It should be noted that universal life insurance premiums paid must exceed a specified minimum level in order to keep coverage in force. There are three kinds of premiums associated with universal life insurance policies: minimum premiums, target premiums and maximum premiums.

The minimum premium is the premium that, if paid each year, would be just enough to keep the policy in force for the next year without the accumulation of any cash value.

The universal life insurance target premium is the amount of premium that is projected to keep the policy in force for the insured's lifetime. There is, however, no explicit guarantee that the universal life insurance policy will remain in force for that period if only target premiums are paid.

The maximum premium is the largest permitted premium that will enable the universal life insurance policy to maintain its status as life insurance. If additional premiums are paid, then the policy will be considered a "Modified Endowment Contract" and lose most of the tax advantages.

Universal life insurance policies may have a "No Lapse Guarantee" premium level, at which the carrier guarantees the death benefit will remain in force even if the policy's cash value should dip below zero (otherwise causing the policy to lapse).

Universal life insurance is suitable for people who need guaranteed death benefit protection but also want to accept part of the investment risk and try to earn additional interest on the policy's cash value. Policyholders may desire a flexible insurance vehicle that can be used to meet financial obligations that will vary during the course of a lifetime, such as those that involve marriage, raising a family and setting aside funds for the children's higher education.

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• Term Life Insurance
• Whole Life Insurance
• Universal Life Insurance
• Accelerated Death Benefits and Viatical Settlements
• Life Insurance/Long Term Care Combination Policies