Universal life insurance (UL) is a hybrid life insurance policy which combines elements of term Life Insurance with an investment savings option. Universal life combines the ability to build savings at the same time as providing you with a life insurance policy. This provides an advantage by allowing you flexibility in what you can do with the savings or investment portion of the premium. Universal life insurance contains an element of long-term investment strategy working both as a life insurance policy and an investment or savings tool, it is generally more expensive than term life insurance because of this.
Two Kinds of Universal Life Insurance:
1. Traditional Universal Life Insurance (UL)
2. Indexed Universal Life Insurance (IUL)
Due to the fluctuations in the stock markets, the traditional UL insurance model may be too risky, therefore if you are looking at a life insurance option that will help you with savings, then make sure and discuss the effects your investment portion will have if the stock market is in a downturn. IUL may be a safer option.
Indexed Universal Life Insurance
If you purchase universal life insurance early in life it can afford a great opportunity to build savings with variable interest rates, flexibility, and cash out options. Along with providing a death benefit, universal life insurance also incorporates a savings vehicle. In short, it is like combining a term life insurance policy with a tax-deferred interest accumulating savings account.
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