What is Variable Universal Life Insurance?
There are many types of insurance policies. Many policies have additional benefits that grow along with your investment. An example of this is Variable Universal Life Insurance. This type of policy is a permanent life insurance. Upon the unfortunate death of the policy holder, it provides permanent protection to the beneficiary. Universal life insurance premiums take interest based on the current market’s interest rates. Returns from interests are added to the monetary value of your policy.
Since the cash value of this particular type of insurance has special “tax-advantaged” status from the government, it has become one of the most well-liked ways to invest. This type of insurance is regulated under federal law securities because of the investment risks. Because of these risks, these policies must be sold with a prospectus.
It is, in general, the most costly type of cash-value insurance since it permits you to assign a portion of your premium dollars to another account. The other account must be compromised by a variety of instruments and investment funds within the insurance company’s portfolio, which includes: stocks, bonds, equity funds, money market funds and bond funds. This also means that you have to pay more cash to guarantee that the policy doesn’t stop running, which is a disadvantage when the economy is suffering.
This type of insurance is a sensible deal for many people. The premiums are flexible–while whole life insurance offers a stable financial base, universal life coverage offers flexibility at a lower cost. For this reason, universal life insurance may be the ‘middle’ option for those considering whole or term life coverage. Flexibility means that withdrawals from the policy’s cash value can be done without any fees, payment schedules can be adjusted whenever you want, and more premiums may be applied towards the policy.
Aside from flexibility, other advantages are that the earnings from the investments are tax-free, so long as the policy is in effect. Also, some companies offer as much as 50 different accounts to invest in, ranging from low-return safe accounts to high-return risky accounts.
And for some people, why wouldn’t this type of insurance be a good deal? For one, it costs more than other kinds of insurance. And, those who plan on buying a policy of this type should be adequately informed about the ins and outs of the risks they may encounter when investing money. As for the more experienced investors, the options offered by the insurance company may be too restricted for their taste.
In the end, disadvantages and advantages are very much debated on. Some think that the risk is too high, while other thinks that the potential return makes it worthwhile.
If you are interested in purchasing Variable Universal Life Insurance, you must choose your agent with utmost care. Do extensive research. Is the company you are considering getting high ratings from their customers? Make sure the company is trustworthy. It would be best to get feedback from outside sources first. Once you are sure of your decision, speak with your agent and make sure the policy is the right one for you. Does it cover your needs? If you pass on, will your family be protected? Finally, is Variable Universal Life Insurance the right kind of policy for you?