Best Universal Life Insurance Policies
Universal life insurance offers permanent insurance coverage with a death benefit payable throughout the policyholder’s life, without being limited to a specific term of years.
If you’re looking to invest in universal life insurance, considering the following factors that make for a best-of policy: 1) Choosing the right level of flexibility, 2) Finding a stable insurance company, 3) Choosing the right guarantees, and 4) Choosing the right riders for your policy. Each of these factors will be discussed in detail to help you come out of the buying process on top.
There are several options for universal life insurance, offering different levels of complexity and risk. Universal life is a good option for people who are prepared to take on the responsibility of managing their policy and keeping track of the details.
Is a Universal Life Insurance Policy Right for You
Before getting into the details, let’s make sure variable life insurance suits your particular profile. People who buy universal life insurance are typically looking for permanent insurance and they want a cash value component that will grow over the years as they make their premium payments. But the most important attribute that universal life insurance buyers are looking for is flexibility.
Unlike whole life insurance, universal life insurance allows policyholders to adjust the size and timing of their premium payments, lower the amount of the policy’s death benefit or raise the amount of the policy’s cash value.
Universal life insurance buyers are prepared to take on the responsibility to manage the greater complexity of a policy where not everything is “set in stone.” They want flexibility to adapt their life insurance policies to meet changing financial needs – for example, a young couple with small children has very different insurance needs than a divorced 55-year-old whose children have grown.
Universal life insurance allows policyholders to adjust their life insurance coverage to better align with their immediate and long-term goals at any stage of life. If you need such flexibility, you’re a good candidate for universal life.
Choosing the Right Level of Flexibility
Universal life insurance is best known for its flexibility – policyholders can choose the amount and timing of their premium payments. But how much flexibility is right for you? Each universal life policy has its own minimum payment levels agreed upon in the contract.
For example, policyholders might agree to a minimum level of payment or a minimum frequency of payments, and if they ever fail to meet those minimums, their death benefit amount might be adjusted downward to compensate – or in extreme cases, they might even lose their coverage altogether.
Before buying a policy, make an honest assessment of how likely you are to stick with the terms of the agreement. Make sure you understand your monthly cash flow and set up a system to keep track of your payments.
Universal life insurance requires a greater level of responsibility from the policyholder. Although flexibility is good, having flexibility also requires the policyholder to pay more attention to the details of the policy and manage the payments appropriately.
Finding a Stable Insurance Company
A universal life insurance policy is only as strong as the reputation of the insurance company that sells it. There are no guarantees with universal life insurance – it’s not like putting money in an FDIC-insured bank account. It’s best to buy universal life insurance from a financially sound, stable, reputable insurance company that is going to be around for the foreseeable future.
Before buying a universal life insurance policy, do some research – check out the company’s financial strength ratings. Make sure you feel confident in the company you’re buying from before signing anything.
Choosing the Right Guarantees
One of the risks of universal life insurance is that the policyholder will fail to make minimum payments, resulting in a lapse of coverage. To avoid falling into this situation, consider buying an additional No Lapse Guarantee rider.
A No Lapse Guarantee Rider ensures that even if the policyholder misses too many payments and the cash value of the policy drops below the minimum amount, they will not lose their insurance coverage. Policies with No Lapse Guarantees tend to cost more than other universal life policies, and also have less flexibility in premiums and death benefit levels.
Choosing the Right Riders
In addition to the No Lapse Guarantee, many universal life insurance policies offer several optional riders that can be added to the policy agreement. These are a good way to add extra value, coverage levels or features to an existing policy. Popular riders include:
- Acceleration Rider – Collect advance payments out of the death benefit, for example, in case of serious illness requiring long-term care.
- Accidental Death Benefit Rider – Added death benefit payments if policyholder dies in an accident – sometimes two or three times the regular death benefit amount.
- Enhanced Disability Rider – Reduces premium payments in case of complete disability.
- Extension Rider – Obtain long-term care coverage in excess of the amount of death benefit coverage.
- Children’s Term Rider – Option to buy term life insurance for qualifying children as part of the same policy.
Different insurance companies offer different riders, depending on the type of policy. Not all riders are available to all insurance applicants – some people might not qualify for certain riders based on age, health, or other factors.
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