Universal life insurance provides several advantages for policyholders who want flexibility and greater control over the details of their policy compared to other forms of permanent life insurance.
Designed to offer more flexibility than whole life.
• The greatest advantage of universal life insurance is that it encourages insurers to modify the size and timing of their insurance payments, reducing the size of the death benefit of their policy in exchange for higher cash value, and make other alterations to quickly adapt to their altering financial needs and various stages of life.
Cash value grows at a variable interest rate, which could yield higher returns.
• Universal life insurance policies have a higher growth potential when the portfolio of the insurance carrier is doing well, as the cash value may grow at a higher rate. But if the insurer’s performance is poor, a universal policy’s cash value current interest rate is much lower than that of a life insurance policy as a whole. Likewise, the policyholder is more likely to increase the cost of coverage when the insurer performs poorly, usually during periods of low interest rates on the market, or as you get older. Due to the level of life insurance premiums, you know how much you will have to pay at any point to maintain coverage.
Adjustable Death Benefit
• Universal life insurance enables policyholders, depending on their changing financial needs, to adjust the amount of death benefit coverage up or down. Policyholders can lessen the death benefit and help increase their monetary value or increase the death benefit.
Adjustable Coverage for Changing Needs
• Consider a 25-year – an old young married couple. In order to protect their children, they start a family and want life insurance. This couple may be less risky in choosing insurance – financial protection is their first priority. They purchase a life insurance policy, believing it will give them a better mix of death benefit and guaranteed cash value. Twenty years fast forward. The kids of the couple are nearly come of age and out of the house. Now the needs of the couple have altered – they don’t need as much financial security as the death benefit amount of their policy offers, but they’d love to have more cash value in their life insurance policy. Unfortunately, their entire life insurance policy is “living in the past.” The policy is stuck with the features and coverage levels they agreed to back when they were in a very different stage of life at the age of 25. This couple underlines universal life insurance’s biggest single advantage: it changes with the times. You can quickly adapt your universal life insurance policy to change with you as your financial needs and lifestyle choices evolve.