It's easy to know how much you want to pay for premiums and how big of a life insurance payout you need today. But what about 10 years from now, or 30? If it's tough to calculate future finances, then a Universal Life policy may be best for you.
You don't have to guess into your future. Instead, you can increase or decrease your premium payments and payout amount over time as your needs change.
When a universal life insurance policy is best
Universal life insurance is a type of permanent life insurance that's much more flexible. It's the only policy that lets you change premium payments and increase or decrease your payout (death benefit) amount. That's the universal life insurance definition, but the common situations are what's really interesting about this policy type.
Specific situations: If you have major expenses that will end, such as paying off a mortgage, business loan, or children's college, then this flexible policy might be a good option for you. When you pay major expenses off, you can easily lower your premium payment for extra cash now and decrease your payout benefit. As long as your policy stays active, you're guaranteed to get the payout benefit. Here are some additional facts regarding universal life insurance:
- Coverage and policy last your entire lifetime
- Policies are best for ages 18-85
- Medical exam is required to start a policy
- Policy may build cash value
- Coverage amounts range from $50,000-$1 million+
See more on whole life insurance, which is the other form of permanent life insurance that's better if you don't want to change your premium/payout.
Universal life insurance cost
The price for universal life insurance is similar to whole life insurance, as they're both less expensive with more policy options. The death benefit can be increased or decreased, as your finances fluctuate. Fees may be involved with lowering your coverage amount.
Universal life cash value: More investment options
A portion of the premiums you pay will be allocated into the cash value account within your policy. With universal life insurance, you'll have more investment choices for the cash value. This can give you more potential to grow your cash value, but may also increase your risk.