Question 1

How does universal life insurance work?

Accepted Answer

Universal life insurance is a type of permanent insurance that offers a flexible death benefit and premiums. While you’re alive and paying premiums — or the policy is paid in full — the cash value savings account will grow based on the type of universal life insurance you purchased. When you die, your beneficiary will receive the death benefit amount in the policy at the time of your death.

See also: How does life insurance work?

Question 2

What companies offer universal life insurance?

Accepted Answer

Not all companies offer universal life insurance. Some only offer term life, while others provide whole life insurance as their permanent life insurance solution. If you’re interested in buying the best universal life insurance plans, we recommend State Farm, Mutual of Omaha, Prudential, Guardian and MassMutual.

Question 3

What are the pros of universal life insurance?

Accepted Answer

Universal life insurance offers lifetime coverage with flexibility in the death benefit and premiums. You can build cash value, and some policies offer features like a no-lapse guarantee and minimum interest rate guarantees. You can use the cash value to pay premiums, make withdrawals, take out a loan or cash it out if you no longer need the policy.

Question 4

What are the cons of universal life insurance?

Accepted Answer

Universal life insurance is not a "set it and forget it" form of life insurance, especially when it comes to policies with no guarantees. If the market returns are poor, you could end up paying higher premiums to keep the policy from lapsing. Building cash value can take time and may not perform as well as other investment strategies. If the policy is not monitored regularly, there is a risk of underfunding it, which can cause the policy to lapse.

Question 5

What is the difference between universal life and whole life insurance?

Accepted Answer

Both universal life and whole life insurance offer permanent life insurance coverage, cash value growth and a death benefit. Universal life allows you to increase or decrease the death benefit and premiums, and both are fixed with most whole life insurance policies. You can also invest the cash value in a universal life insurance plan for faster growth. If you’re looking for permanent life insurance, whole life offers predictable premiums and coverage, while universal life has more flexibility and needs to be closely monitored for it to remain in force.

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