Universal life insurance ( UL) is a blend of low-cost term life insurance protection with a savings component found in whole life policy. Premiums paid each month or annually beyond the cost of the insurance coverage earn interest.
Once insured, most companies allow you vary the premiums and adjust the death benefits. UL life insurance companies may offer a loan option, and withdrawals when done within IRS guidelines and regulations which may be tax-free. “Flexible” is often used to describe Universal life insurance.
Some better known UL policy types are Single Premium, Fixed premium, and Flexible premium.
You decide the amount of insurance and the premium payments (there are minimums). Proceeds are generally income tax free to the beneficiary. Cash value build up is tax deferred under current tax law. Cash value can be accessed to help with education expense, supplement retirement or other personal desires.
Universal Life Insurance policies have a expense and interest rate component which can make comparisons challenging. UL policies are not to be considered investments and are not to be sold as an investment.
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