Universal Life Insurance An Ideal Mixture.

Universal life insurance gives the third dimension to the insurance sector, ruled by whole life and term life totally. It is a great mixture and the better of the two worlds of whole life and term life insurance policies. Thus, every insurance quote seeker must analyze the possibility of getting universal life insurance when asking for whole life or a term life insurance quote to see how universal life insurance fits the needs of the insurance seeker perfectly.

During the later part of 1970s Universal life policy came into reality. This was mainly brought into the limelight of insurance policies to provide an option to the policy holders to retain their cash value for their policies. Else, the cash value gained thru whole life policy will be withdrawn by customer to invest in CD making business. During that time, CD making had more profit and offered higher interest than whole life policy. Universal life policy made a critical change to have the interest rate fluctuations flexible. In this policy, the payment you make is split into various buckets such as cash value, administrative charges, premium loads, Cost of Insurance Charge (COI) etc. The cash value here generates interest which will be carried forward on the insured policy. The subscriber has to determine the insurance life rate for this interest to be carried, which can vary. Nonetheless, there is an assured minimum rate. COI will increase along with the age of the policyholder. However, the interest generated by cash value will increase faster than the COI to make up for the difference.

Major benefits of universal life policy are below.
Life time protection
Very low risk towards cash value
Tax exemption on cash accrual and withdrawal.
Market rate of interest is offered towards cash value.
Accrued cash withdrawal or borrowing facility.
Non rigid premium options.
Non rigid sum assured selection.

One of the most salient features in universal life policy is the flexibility offered towards premium payments. It all depends on how you would want to make your payments for a specific period. If you are okay to make large payments for a short duration instead of average payments for long, you can choose to make it accordingly. Also, if you feel you are going thru a financial crunch for some time and would want to miss payments for a period of time, you can do that too. If the interest rate increases, you can decrease your premium amount. However if the interest rate decreases you may have to increase the premium. You also have the option of increasing or decreasing your sum assured in this type of plan.

Some of the disadvantages of the universal policy are as follows,
Account is not flexible.
Cash value accumulation is not guaranteed.
Policy is not guaranteed to be in effect, in the absence of sufficient premiums.

The risks that are associated with a situation where no guarantee policy is very large for a individual to manage. The mortality and interest rate fluctuation effects are shifted from insurance company to the insured. As a result, the essence of guarantee by the carrier also gets reduced. The COI and the interest rates even out each other, until such time the policy and its benefits are realized. However, once it does not even out, the cover becomes extremely costly for the insured. At times, the family may not get the death benefit at all.

There are basically three types of universal cover which are called fixed premium, flexible premium and one time premium. As the name reads, fixed is a fixed premium payment throughout the term. Flexible and one time are to qualify for their specific band of premium payments. In order to qualify for returns, the universal policy has to be in force for at least 15 years. This plan can be an ideal plan for people who are aged 70 or above and are expecting returns from their insurance. This can be a very good option for investment. People who do not want to have insurance for that long can opt for term life and 401K as a separate vehicle of investment.

You must know all the benefits and the associated risks related to your universal life policy and then take a wise decision. Flexibility offered can be very attractive one; it is associated with huge risks as well. Many people preferring to take life insurance no medical policy over the medical exam policy, insurance carriers are also offering medical cover under universal policy as well.

Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on life insurance quotation and instant term life insurance quotes, visit his site today.