Traditional or Non-Guaranteed Universal Life
Unguaranteed universal life insurance is a specific type of permanent life insurance, which means you purchase life insurance. Like every other life insurance policy, an unguaranteed policy holds a death benefit and with an investment aspect tied to it. Any permanent life insurance policy is covered by a non – guaranteed policy but with an investment component in which your premiums are invested.
Because traditional universal life is a non – guaranteed product, it can eventually cost you huge fortune (in the form of just not having life insurance when you most need it, and also income tax repercussions of canceling your policy, including phantom income tax) if your policy is dropped (lapsed or cancelled) due to insufficient cash value or insufficient additional higher premiums. Cash value is not a death benefit when it comes to an unguaranteed universal life policy! If you don’t withdraw it before you die, the insurance company will keep that money. The cash value can be used to borrow from the policy for a no-lapse guarantee.
. No Lapse Guaranteed Universal Life
This is fairly similar to a traditional or unguaranteed universal life policy except that your premium is guaranteed to never rise, and as long as that guaranteed premium is paid on time, your death benefit will always be in force. Guaranteed universal life is a relatively recent invention, and it is popular because it works without expiration and with fixed premiums as your life – long policy or term life.
. Variable Universal Life
Within certain limits, variable universal life insurance policies enable you to vary premium and death benefit payments. This type of policy applies to individuals who want to build cash value and handle their very own investment choices.
You can invest your cash value in multiple “sub-accounts” like stocks, bonds or money market accounts. There may also be an option with a fixed rate of interest. You can typically use loans or withdrawals to access the cash value. If you choose not to want the policy, you can simply cancel it and, if any, take the surrender value. Typically, if you want out in the first few years, there are surrender charges. The policy will outline the charges of surrender.
. Indexed Universal Life
Several people have lost their life insurance policy or savings by investing in the past 20 – 30 years in a traditional universal life policy, but the new indexed universal life policy has been developed to provide safer options. Choosing an intelligent policy will help you create your assets and actually build your wealth while safeguarding your beneficiary’s death benefit. An IUL policy could ensure that your interest rate is never lower than zero. The index floor is called this number. So you’re not going to lose cash value if your index tanks