Life Insurance Tips
What Is Universal Life Insurance? Why You Need One
The prospect of dying is not a popular topic with most people, but a serious topic that does deserve some contemplation. This is especially true if you are the breadwinner for your family and, in the unlikely event of your early death, they could be placed in a very delicate financial situation. With you gone, you have to wonder how in the world they are going to be able to pay their bills. Having a lump sum of money that can provide them with the cash flow that they will need is a responsibility that every breadwinner of the family needs to consider, especially with a large family. There is one particular type of policy that is very popular called universal life insurance. Here is an overview of this type of life insurance, how it differs from other types, and where you can get the best monthly premiums.
Understanding Universal Life Insurance
UL is a type of insurance that is designated as permanent life insurance. It is different from a term life policy, or a whole life policy, because excess premiums will be credited with the actual cash value of the policy itself. This credit is applied every single month that you make your payment with interest. Each month the policy is debited by the COI charge, as well as other fees, even if no payment is actually made. The insurer of the policy will determine the amount of interest that will be credited, and typically has a minimum interest rate of about 2%. Many people like to take out this kind of policy because of these aspects, and the fact that it has some advantages over whole life and term life policies that we will now discuss.
Other Types Of Life Insurance
Before we discuss universal life any further, it's good to know that there are some differences or at least advantages, over having universal life over all of the others. For instance, with a term life policy, the payments that you make are required in order to keep the policy in force. The only money that your family will receive is the actual value of the death benefit that typically remains steady the entire time that the policy is in force. For example, if you were buying life insurance and got a 20-year term life insurance policy at which you would only pay a minimum amount of money for the duration of the 20 years, never changing. A whole life policy is similar to term life with the exception that there is typically a savings account or an annuity attached to the policy that can be used in advance as a way to borrow money for emergencies, and if it is still there at the time of your death, your family will receive that as well.
Why You Should Have A Universal Life Policy
This type of policy serves many different functions including paying all of your final expenses including unpaid medical bills, your burial and the funeral. It provides income replacement, debt coverage for personal and business debts, and there are certain tax benefits associated with it, including working as a Roth IRA alternative in some cases. The main benefit, of course, is that you will not have to worry about your family after you are gone because they will receive the death benefit shortly after you are gone. It provides you with the peace of mind knowing that they will be taken care of in your absence, the main reason that anybody takes out a life insurance policy.
Now that you know the difference between the many different types of life insurance that are out there, and why you should have a universal life policy. Consider talking to your local insurance broker to find out what they have available. You will also need to find out what rates will be charged, and what options are available to you that can ensure that your family will have enough money to survive after your death. This is a responsibility that every breadwinner of the family must embark upon at some point in time.