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Universal life insurance is a type of permanent life insurance that gives you the flexibility to make alteration to the amount of premiums or death benefit at any time. A universal life insurance provides coverage for your whole life and there is accumulation of tax-deferred cash value with the passage of time.
Universal Life Insurance Benefits
Flexibility is the main benefit of universal life insurance. Universal life insurance provides you to make decisions about your required coverage and also to adjust the death benefit as well as to change the premiums cost.
Flexible Premium Costs
Your circumstances are likely to change throughout your life. Generally, your financial ability will be more during the income producing years compared to your retirement years. If you have a universal life insurance policy, you can make adjustments to the amount of premiums as and when the situation demands - increase, decrease or lower it, according to your needs. This type of control over the policy makes many to prefer Universal life insurance, as opposed to the fixed amount of premium and also the set death benefit that is found in a typical whole life insurance policy.
Cash Value
Universal life insurance helps you to gain tax-free cash value as follows:
- On cancelling the policy, you receive the cash surrender value
- The cash received on cancellation can be used to add to your retirement income
- Your policy can be used to take loan
- You can use cash to pay the amounts of premiums
Drawbacks to Universal Life Insurance
The amount of cash value for universal life insurance policy is not fixed as it is the investment performance of the premiums that determines it. Although you can make adjustments to the amounts of premium, you have to adhere to a target premium. Also, changes to the amount of premium are depended upon your having enough money to cover the costs in the cash value account.
Although, the amount of premiums is adjustable, the cost of universal life insurance policy may still be high enough.
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