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Definition of Universal Life Insurance Policy

Universal Life Insurance is a type of permanent insurance that offers flexible premiums and a flexible death benefit. The policy is, first, intended to provide coverage for dependents in the case of the death of the insured person. Universal Life Insurance offers variable premiums, benefits and payment schedules. Universal life premiums are based not only on the cost of the insurance, but also on the interest rate offered on investments.

Typical features of the universal policy are the following. The face amount is flat, paid upon the death of the policy owner and free from income taxes at death. The amount of insurance is customizable as death benefits can actually be changed during the life of the policy. This policy accumulates cash values tax deferred and a policy owner has an access to it in the event of emergency.

There are two main advantages of a Universal Life policy. The first one is that the savings portion of a universal life policy can be used to build net worth over time. The second major advantage of a universal life policy is its savings feature which a policy owner can use to secure a low-interest loan.

Make sure you compare plans and premiums as these vary by location and insurance company.