Understanding Universal Life Insurance

"Flexibility with your payments"

Understanding universal life insurance policies is easier when you think about it as being a “flexible” policy.

Compared to a whole life insurance policy the universal life insurance (payment) premium structure can be more accommodating to your needs, which is what makes Universal life more attractive to some people!

What is Universal Life Insurance?

If you’re just starting out your search then you may want to start at the beginning on What is Universal Life Insurance to get all the basics and the definition of a universal life insurance policy.

Then work your way back here after you’ve read up on all the benefits. I’ll be here waiting for you!

Deal?

Don’t get those universal life insurance quotes without knowing about the policy first!

Okay… moving on now to understanding universal life insurance premiums!

Life Insurance universal policies
About the Premiums

With whole life policies, you are required to pay a set premium amount to keep the policy in force. If you don’t pay it you risk losing your coverage!

With a universal life insurance policy you have more flexibility in making those payments (also called premiums). And, you have a few options to choose from!

This is where the “flexibility” part comes in….. Now pay attention here because this is important.

You have the option of choosing between:

• Minimum Premium
• Target Premium
• Planned Premium

Understanding Universal Life Insurance
Premium Definitions

Minimum premium- This is how much you need to pay to keep your policy active for the month. However, if you only pay the minimum premium each month then you’ll build only a small cash value amount, because it is only enough to pay the fees for the policy.

Target premium- When you pay the target premium, which is usually more than the minimum premium you end up with a cash value that grows more than if you only paid the minimum premium above. (The more premium you pay the more cash value you build up.)

This target premium is enough to keep the policy active, and to really help the cash value grow more.

Planned premium – This is what you have actually decided to pay as the policy owner.

Understanding Universal Life Insurance
Example of Premium Flexibility

When understanding universal life insurance, it’s important for you to know how all this “premium talk” can really benefit you. Let’s use an example.

Let’s say that you’ve just had a new baby come into your life! Congratulations!

You realize that you have more responsibilities and have decided (with the help of a knowledgeable professional) that you are going to purchase a Universal life insurance policy. With Universal life you have the flexibility to choose whichever premium will suit your needs at this time.

Now ….since you’ve just had a baby, you’ve got hospital bills to pay. You’re also taking a break from work to spend time at home with your new baby. Your budget is a little tight right now so you decide to go with the minimum premium (the least amount you can pay).

By choosing the minimum premium you are paying the minimum amount possible and you still have coverage!

By choosing the minimum premium, your cash value is not growing very much. However, right now you feel it’s important to play catch up on all those bills. Later you have the option to increase it to start building more cash value!

You should always consult with a life insurance agent when choosing life insurance. A knowledgeable agent can assist you in finding an affordable life insurance policy to suit your individual needs, because they will always be different from somebody else.

Learn more about Life insurance Universal Policy Benefits!

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