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Modern Universal life insurance (or "UL) is different from
Whole
life in that the new UL products have what is called a "secondary
guarantee". What this means is that no matter what happens, as
long as you pay the prescribed premium, the policy will stay in
force. With most UL's, you stop paying premium at age 100.
UL
is different from Whole Life in that it does not guarantee to
"endow" for the face amount at endowment age (usually age 100).
To endow means that the policy will have the same amount of cash
value at endowment age as the face amount. If you care about
the cash value in the policy equaling the face amount at age 100,
then you should either put more money into a UL or get a Whole Life
Policy - Whole life is MUCH more expensive, though!
Universal Life Insurance features:
-
Lifetime Coverage as opposed to "term" insurance
coverage.
-
Limited Pay Provisions whereby you can pay the
policy up in, say, 10, 20, 25 years...this is called a "limited
pay" UL. This will cost you more as opposed to paying the
premium over a lifetime.
-
Cash withdrawals or loans can be made as long as
there is enough cash buildup in the policy - UL does build cash
on a guaranteed and non guaranteed basis.
-
Universal Life Insurance is Cheaper than Whole Life because it does not endow
for the face at age 100 (do you really want this anyway?).
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