LIFE INSURANCE
WHAT IS UNIVERSAL LIFE INSURANCE?
Universal life insurance provides more flexibility than whole life insurance. Where whole life insurance has a fixed rate premium linked to an investment component, with universal life insurance, you have the option to pay premiums above the minimum required cost of insurance, in order to create a cash value that can be used in the future. In other words, universal life insurance offers you low-cost protection combined with a savings element.
The cost of the insurance coverage keeps the policy in force, while any premiums paid over the minimum cost of insurance, will accumulate. You can draw these savings out at a later date, and use them to continue to pay the monthly premiums if you wish. Your universal life insurance policy is guaranteed, just as long as the minimum cost of insurance is covered – but this can be either through the monthly payment of premiums, or from the cash value of the savings.
UNIVERSAL LIFE INSURANCE
WHEN SHOULD YOU BUY UNIVERSAL LIFE INSURANCE?
It is recommended that you should purchase a universal life insurance policy early on in life, while you are still in your twenties or thirties perhaps, as this enables you to build your assets over a longer period of time. In an ideal scenario, you would want to have your universal life insurance policy for a minimum of 10-15 years before you cash out or consider moving your investment.
A universal life insurance policy bought while you are still in your twenties, would be perfect to use as a down payment on your first home. Remember, buying life insurance while you are young means you reap the benefit of low rates. These costs will increase as you get older. It pays to have a plan for your lifetime financial strategy.