Life Insurance Blog

Flexibility is universal life
May 6th, 2009
in Life Insurance

Universal life was created for the flexibility that it provides customers.  It is a form of permanent insurance along with whole life, but it provides flexible aspects.  Whole life insurance is pretty straight forward and requires that the same premium always be paid to keep the policy in force.   If the premium is not paid the policy will lapse, unless the dividend is large enough at that point to cover the premium.  This is know as premium offset on whole life.  Universal life allows for a flexible premium to be paid.  There is a range that can be paid to keep the policy in force.

For a client who wants to emphasize and grow the cash value, they should fund the policy near the MEC level.  The MEC level is the maximum you can put in a life insurance policy and  still qualify for favorable tax treatment.    Others may only care about the permanent death benefit.  For clients who just want the death benefit, we suggest they fund it at the very minimal level and this is called guaranteed universal life.   Of course, a lot of clients fund the policy in between the bottom and the top level.  If there is enough money in the cash value, premium payments can be skipped.   This option would obviously not be there on the guaranteed UL as there is little if no cash value.  The amount you pay can vary and you can start by funding it at the highest level and you can always fund it less later.

On top of that a level death benefit or increasing death benefit can be selected.    You can start off with increasing and level it out later if you want.   Universal life is truly a flexible product that can meet many different objectives.

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