Universal Life Insurance
Universal life insurance is a variation of the Whole Life Insurance policy. The insurance part of the policy is separated from the investment portion of the policy. The investment portion is invested by the insurance company in bonds, mortgages and money market funds. This investment portion grows and is tax-deferred. The cost of the death benefit is paid for out of the investment fund. A guaranteed minimum interest rate applied to the policy means that, no matter how badly the investments perform, the insurance company guarantees a certain minimum return on the cash portion. If the insurance company does well with its investments, the interest return on the cash portion will increase.
You can vary the amount of your premium with Universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit. For this flexibility, you'll pay higher administrative fees.
There are often hidden costs in life insurance policies, such as fees and large commissions that you may not find out about until after you purchase the policy. There are so many different kinds of life insurance, and so many companies that offer these policies, that we suggest using a fee-only insurance advisor who, for a fixed fee, will research the various policies available to you and recommend the one that best suits your needs. To ensure objectivity, your advisor should not be affiliated with any particular insurance company and should not receive a commission from any policy.
When choosing life insurance, use the Internet's resources to educate yourself about life insurance basics, find a broker you trust, and then have the policies he or she recommends evaluated by a fee-only insurance advisor.
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