Universal life insurance is a type of permanent life insurance plan. A person who has a universal life policy is considered a wholly insured person. Here they are all covered for the complete duration of their lifetime. The person is secured as long as they pay all the premiums. However, they need to fulfil any other requirements of the insurance policy to maintain its coverage.
Out of many permanent life insurance policies that various companies offer, universal life insurance generally has a saving component. It is also known as “cash value.” It also comes with lifelong protection. Even if the insured person passes away, the policy holder’s death benefit is given to their family members or beneficiaries.
The benefits of universal life insurance
The main benefit of having a Universal life insurance plan is that the insurance companies generally offer lifelong protection to their clients. Other benefits that are offered with it are as follows:
● They can withdraw money or borrow money against the policy’s cash value that they have made for themselves.
● Here the cash value of the policy also earns interest of its own.
● The person doing it also has flexibility with the payment of premiums.
● A person can adjust all the death benefits.
How does universal policy work?
When a person who has done the policy withdraws any money or borrows any money or benefit against it, when they pay out their premium on the universal life insurance plan, a portion of the money goes towards the payment for the death benefit of the insured person. After that, another portion of it also goes to building up the cash value of the policy. After that, when the total money which the person takes is accumulated, they can withdraw or borrow cash value against the policy they made.
The rules on the amount and when they should withdraw the money from the insurance company and policy can also vary. But here, the major drawback of borrowing any money against the policy is that this may reduce the death benefit of the insured person. This, in turn, will also create a type of tax implication, or it can cause the policy to lapse if the payment is not made on time.
The cash value of the universal life insurance policy usually earns all the interest, which is in line with the current state of money market rates. Another important factor here is that the interest rate in the so-called policy can fluctuate along the way with the market condition.
This may also sum up that the interest amount that a person receives may also go down with due course of time. However, many companies in the world offer protection against the condition of the market. They also give a minimum performance guarantee on the policy, making it relatively safe to invest in it.
That’s it! Now you know all about universal life insurance plans. These interesting facts about universal life insurance are aligned with the advantages for the policyholders. To learn more about universal life insurance, get in touch with the experts at CHESVIE.
CHESVIE is one of Canada’s best insurance service providers, providing top notch support to its clients and helping them make some essential decisions about themselves and their family’s security.
