About Universal Life Insurance
Many people have heard the terms whole life, life insurance and term insurance. These terms have been
around for over 100 years in the life insurance world. Universal Life Insurance has only been in the
marketplace for the last 25 years. It was developed to meet the changing needs of the consumer.
Term insurance was developed to protect individuals for a definite period of time or “term”. One of the
advantages of term insurance is its considerable low cost. The big disadvantage, of course, is when people
get to be over 60 it is quite expensive and therefore difficult to fund when probably needed most. Most term
insurance is expired before people die.
Life insurance covers people until age 100, thus “life”. There are reserves established by insurance
companies to offset the increasing costs of insurance protection as people age. Thus “cash values”
developed. They were paid to the beneficiaries as “part” of the death benefit. The cash value was actually
the property of the insurance company.
Universal Life Insurance was developed to show people very distinctly what the “reserve” or investment
portion of an insurance policy was, and the “cost” of the annual insurance. Universal Life allows a person to
select the amount of premium they want to pay, falling within a range of allowed minimums and maximums.
Premiums that are paid above the actual cost of insurance go into an investment fund that belongs to the
policy holder rather than the insurance company.
Universal Life programs allow people to pay additional funds into an investment account and actually
prepay their insurances. There are some definite tax advantages which this article does not have the space
to address. As well, people can adjust the amount of insurance which is required at different points in their
lives, and only pay for the coverage they need, at the times they need it.
Universal Life is probably one of the most flexible insurance plans that has been developed. The