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Wikipedia, the free encyclopedia explains Universal life
Life Insurance defined: Term, Whole, Universal
Term Life has a locked in rate for the specified term and a set death benefit. Provides temporary coverage for a specified period of time (5 years to 30 years). After the term the policy does not cancel, but the rate may increase. The death benefit is the same at all times. No cash values accumulate during the policy term. Most term life policies can be converted to a permanent policy, whole life or universal life without medical qualification during the conversion (term) period.
Whole life insurance is the most conservative type of the three. The investment feature in whole life insurance is tied up within the company’s own investments. If the insurance company’s own investments perform well then the policy will pay a higher rate of return or dividend.This kind of permanent insurance is typically the most expensive but gives you the option to have it contractually paid up after a certain number of years. Again though, it all depends on the company’s own financial success, so make sure you choose a proven and solid company.
Universal Life has a minimum rate of return and is generated by interest rates. Aside from the insurance itself the investment portion of the policy is similar in many ways to a normal savings account at a bank. In markets where interest rates are high, they perform well and in times where rates are low they do not.Unlike whole life insurance, universal life insurance policies have flexible premiums. As long as there is sufficient cash value to pay monthly deductions, including cost of insurance charges, the policy stays in force. The monthly cost of insurance changes typically increase each year. The cost for Universal life is a bit less than whole life but you should expect to pay into this policy for a number of years before you have any substantial cash value. The one benefit though that these policies have in comparison to whole life is that the flexible premiums give you the ability to pay more or less into the policy, within certain limits. We can lower the amount of cash values in this policy and make the rate locked for life & keep premiums affordable.
