Universal Life Insurance- Universal Life Insurance offers the low-cost of a term life insurance policy but also includes a savings element (like a whole life policy). The savings element is invested to provide a cash value buildup. The death benefit, savings component and premiums can be reviewed and altered as a policyholder’s circumstance changes. Your premiums for the policy first go to pay for the policy (cost of insurance) and then the excess goes to the savings.
Features of Universal Life:
1) Your premiums are flexible so if you want to put more money into your policy the excess premiums go into your cash value which acts as a tax deferred investment.
2) You can choose a level or an increasing death benefit.
Guaranteed Universal Life- Guaranteed Universal Life provides affordable long- term coverage. The rates (premium) are guaranteed to a specific age such as 90, 95, 100 or beyond. This product does not have cash values. This is a good option for someone who is getting older and may not qualify for term insurance or term may be too expensive because of age. The most common use for this insurance is 1) leave an inheritance or 2) protect estate from estate taxes when you die.
Indexed Universal Life- This policy allows the owner to allocate cash value amounts to either a fixed account or an equity index account such as the S&P 500 or the Nasdaq 100. The key here is that the cash value is only measured against the indexes but not actually invested in the market. The index gains are credited back to the policy either on a monthly or an annual basis. The gains are credited to the policy based on a percentage rate referred to as the “participation rate” which is set by the insurance company.