4 Factors that Affect the Cash Values of Universal Life Insurance

4 Factors that Affect the Cash Values of Universal Life Insurance

Selecting the best cash-value life insurance policy is a difficult task involving a number of complicated concepts. However, because the amount insurers credit to cash values on UL policies is a critical element of the overall cost of the protection, one primary area of focus should be how the company determines the amount it credits to cash values. The amount insurers credit to cash values each year depends on four factors: The expenses insurers charge…

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Fees and Acquisition Costs of Universal Life Insurance

Fees and Acquisition Costs of Universal Life Insurance

Universal Life (UL) policies charge front-end and/or back-end loads or surrender charges to recoup commissions paid to the selling agent and the expense of issuing the policy. Originally, UL policies were front-end loaded, but now most policies are issued with little or no front-end load. In other words, the insurer credits the policyowner’s entire premium to the cash value. In lieu of front-end loads, companies assess a surrender charge that generally declines with longer durations….

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5 Alternatives to Universal Life Insurance

5 Alternatives to Universal Life Insurance

Insurers and policyowners can configure a UL policy’s premium payments and death benefits to resemble virtually any type of life insurance policy, from annually-renewable term to single premium whole life. Consequently, any other type of policy that meets a policyowner’s needs is a suitable and, perhaps, preferable alternative if the policyowner does not need the UL’s flexibility. However, a number of other types of policies or strategies offer some of the features of UL and…

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Tax Implications of Universal Life Insurance

Tax Implications of Universal Life Insurance

An important exception to the general cost-recovery rule applies for withdrawals within the first fifteen years after the policy issue date that are coupled with reductions in death benefits. Because insurers generally reduce death benefits in an amount equal to any withdrawal of cash values, policyowner withdrawals frequently may trigger a tax on all or part of these withdrawals to the extent of gain in the policy. The rules tax such withdrawals in whole or…

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6 Disadvantages of Universal Life Insurance

6 Disadvantages of Universal Life Insurance

Understanding the disadvantages of universal life (UL) insurance helps consumers make the most educated decision. Here are the 6 major disadvantages that should be considered when considering universal life: The flexibility associated with premium payments can be a disadvantage because policyowners can too easily allow their policies to lapse. There is no forced savings feature, because UL policies do not require premium payments as long as the cash value is sufficient to carry the policy….

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12 Advantages of Universal Life Insurance

12 Advantages of Universal Life Insurance

Understanding the advantages of universal life insurance helps consumers make the most educated decision. Here are the 12 major advantages that should be considered when considering universal life: The policyowner has wide discretion or flexibility in selecting the premiums that they pay. Provided that the policy has enough cash value to cover mortality charges, the policyowner may even skip premium payments. In contrast with other types of policies, skipping premiums does not result in the…

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3 Instances in Which to Consider Universal Life Insurance

3 Instances in Which to Consider Universal Life Insurance

Potential policyowners may consider UL for any life insurance need. Initially, the insurer and policyowner may configure a UL policy’s death benefit and target premium level to resemble virtually any type of life insurance policy from annually renewable term insurance to single premium whole life. However, because of policy costs, UL generally is best suited for long-term coverage needs. For short-term (less than five to ten years) needs, a nonrenewable term policy generally will be…

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A Basic Introduction to Universal Life Insurance

A Basic Introduction to Universal Life Insurance

Universal Life (UL) is a “flexible premium” “current assumption” “adjustable death benefit” type of cash value life insurance. The term flexible premium means the policyowner is permitted to select whatever premium he or she wishes to pay—within limits—and later to adjust or change the premium. Policyowners may even skip premium payments as long as the cash value is sufficient to cover policy charges. The term current assumption means that current interest rates, as well as…

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