Universal Life: Protection that can pay while you are still living.
"That's great,"
the agent told him. "And she is the one who has paid it all
these years? Whom do you suppose the beneficiary is? How much of
that policy do you suppose she will give to your new wife to help
pay for your new house and raise your kids if something should happen
to you?" He really hadn't thought about that. Life insurance is the last thing young couples really want to purchase. Many have put it off because they had some at work, or because their parents already have some on them. But if someone else has paid the bill, then that someone is entitled to the benefit if you should die. No one expects to die young, so young folks all too frequently put off getting their own life insurance until they are much olderand it's either so expensive they can't get what they would have liked, or they don't qualify medically. Fortunately, there is a way to have life insurance protection that will benefit your loved ones if you should die, but will also give you some additional assets for your mid-life to senior years. After all, who wouldn't like that cruise or mountain vacation once the kids are grown and the house is paid for. The answer is Universal Life. A UL, as it is often called, is a life insurance policy with a savings plan. Each month you put enough money into the policy to pay the cost of insurance plus a little more. You can put in as much as you want and can add more any time. The company will pay the cost of insurance out of your accumulation and will pay interest on the remainder of the accountwhich should grow, if funded properly. The longer you leave the accumulation fund alone, the bigger it will get. Later in life, once the bills are paid and the kids are grown, you will have a policy that may have more life insurance than you will need by then. If so, you can take some of the cash out of it, adjust the face value and premium if necessary, and still have whatever life insurance you want to keep. Actually, you can take money out of the accumulated funds any time, but you should be aware that you need to leave enough to fund the insurance portion of the policy. Otherwise, you may have to increase your premium. Universal Life has another plus that traditional whole life doesn't have. You have access to accumulated funds without taking a loan. You get a review every year and can see if the accumulation is continuing to grow. If the accumulation fund starts to drop, that means your cost of insurance and fees has increased above the amount you are paying in premium, and the company is having to use some of your savings to fund the life insurance. You have three alternatives. The firstwhich it not the best oneis to simply surrender the policy, and take the cash. This is not the ideal way to do it because you could end up with a taxable eventunless you are using the cash value for a 1035 exchange into a single premium whole life. The second alternative is simply to increase your premium above what is needed to fund the life insurance. Always go 2 to 5 dollars over what is needed so you have something to accumulate some interest. The third alternativeshould your accumulated funds begin to decreaseis probably the best, depending on your age. You can do a 1035 exchange into a fixed annuity. Annuities work like life insurance in that they avoid probate and go directly to your beneficiary upon your death. They also have an added benefit of ending the need for premium payments on life insurance, and yet creating an account that will continue to grow tax deferred. Depending on the terms of the annuity, you can also withdraw funds if you need them. You should be aware, however, that since an annuity is a type of retirement fund, you generally cannot withdraw funds before age 59 ½ without paying a penalty to IRS. Universal Life policies are very inexpensive if they are purchased when you are youngalmost as cheap as a Term policy but with much better benefits to you and your family in future years. Use our online service to find the cheapest quotes now >>
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short time ago, an agent friend asked a young, recently married
man if he had life insurance. "Oh, no," he replied. "But
my mom has it on me."
