Life Insurance Blog

in Life Insurance,Universal Life Insurance,whole life insurance

Have you ever tried to read a life insurance illustration?  Often times they are so complicated that only a seasoned agent can understand them.    They have all the disclaimers on them about returns and typically you will see at least two columns of projections.

One column will be the guaranteed column, which will be the worst case scenario.  The other column is the assumption column.  This is usually based on the companies current dividend scale or some type of hypothetical return.    It is important to look at what guarantees are built in and to look at the companies historical results.   If you have a dividend paying whole life product, the dividends will go up and down.  The dividend is based on the companies success and the success will obviously fluctuate over a long period of time.   Most good mutual companies have never missed a dividend, but the amount of the dividend is the key.  If you are talking about a universal life, there is a bottom floor interest rate or return level in one column.  Many plans might guarantee like 3 or 4 percent as a worst case scenario.   The other side will be some hypothetical interest rate or market return.  This like the dividend is a total guess based on some historical data and future projections.

The key to reading an illustration is that it will give you some rough parameters.  Just remember that it will never play out exactly as illustrated.

in Universal Life Insurance
Have you talked to your life insurance consultant about a Universal life insurance Policy?  A UL (Universal Life Insurance) contract is a unique type of coverage that offers many benefits to the policy holder. Generally speaking, this is known as permanent life coverage that holds a cash value. Premium payments made to the insuring company in excess of the premium are added into the overall cash value bucket. Many individuals do not want to add to the cash value this is a good idea because it earns interest every month. To go along with this, any unpaid premium amount or fees can also be deducted from the cash value.  Do you understand the tax implications with a Univesal Life Policy?
Many people shopping for life insurance struggle now that so many products are available in the marketplace.  Do you know how much interest can you earn each month with universal life insurance? This will vary on the company you are dealing with. The insurance company is in charge of setting the two types of rates. One will be your guaranteed interest rate.  This is put into force so you know that a minimum return is available for you.  The other rate in many cases this will be attached to a particular index or bond. No matter what it is important for the policy holder to be aware of how they can collect interest and what it is based on.
We have discussed briefly the benefits of a Universal Life Policy.  There are many other benefits of purchasing universal life insurance.  The tax advantage of using a permanent life insurance policy is huge.  During the first few years of coverage the premium due is much more than the cost of insurance charges, also known as COI. The difference between the two numbers has the ability to grow free of taxes as long as the policy is kept in good standing. The reason for this is simple: the premium is being paid with dollars that have already been taxed.
As you can see, universal life insurance not only offers a death benefit but can also be a great savings vehicle as well.  Understand that a Universal Life Insurance Policy is for the long term solution.  After on the plan for 15 or 20 years the insurance costs (death benefit) costs increases dramatically.  That is when you will see the cash value really building quickly. 
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