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Universal Life Insurance

Mature couple reviewing universal life paperwork in their kitchen.

Universal life insurance is lower-cost, flexible, permanent life insurance that offers a savings element, which can be invested to build up cash value. As your life circumstances fluctuate, the premiums, savings component, and death benefits can be reviewed and changed. Our agent at Jon Nolan Insurance in Coppell, Texas, can recommend a universal life insurance policy that works to protect your family and for your budget.

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance. With a universal life policy, the insured person is covered for the duration of his or her life as long as they pay premiums and fulfill any other requirements of their policy to maintain coverage. Like many permanent life policies, universal life insurance combines a savings component (called “cash value”) with lifelong protection. When you pass away, the policy’s death benefit is paid out to your beneficiaries.

How Universal Life Insurance Works

Under the umbrella of permanent life insurance, universal life insurance provides more flexibility than whole life insurance. The insurance company breaks the premiums down into two categories: the cost of the insurance and the cash value, or savings component. As long as the cost of the insurance is covered to keep the policy in force, the premiums can be adjusted based on the policyholder’s needs over time.

Premiums over the minimum cost of the insurance accumulate as cash value. Those funds can be used to pay premiums. The policy is guaranteed for the entire term, as long as the minimum cost of the insurance is covered one way or another, through paid premiums or cash value.

The insurance company issuing the policy establishes an interest rate minimum. If the portfolio outperforms the minimum interest rate, excess earnings can be applied to the cash value. Policyholders can borrow against a portion of the cash value without affecting guaranteed death benefits and with no tax implications. Withdrawals can also be made but may incur tax liabilities.

Benefits of Universal Life Insurance

Beyond lifelong protection, additional features of universal life insurance include:

  • You can withdraw money or borrow against the policy’s cash value.
  • Your cash value earns interest.
  • You have flexibility with premiums.
  • You can adjust the death benefit.

Who Should Consider Purchasing a Universal Life Insurance Policy?

The Insurance Information Institute (III) offers some guidelines on how to decide whether permanent life insurance like universal life is right for you:

  • If you’re looking for coverage that lasts your entire life. If you keep up with your policy’s premiums, universal life pays a death benefit to your beneficiaries no matter when you pass away.
  • You have long-term savings goals. If you want to build tax-deferred savings and don’t expect to tap into the funds for a long time, universal life may be a suitable option for you, the III says. The cash value option that’s part of a universal life policy may be available for you to withdraw or borrow against in an emergency.

Factors affecting the cost of universal life insurance include your age, health, weight, occupation, whether or not you smoke, and the policy itself. With a universal life insurance policy, you may be able to adjust your premiums and death benefit over time to suit your needs. For more than two decades, Jon Nolan Insurance has offered the best available universal life insurance policies to customers in Dallas, Fort Worth, Arlington, Frisco, and throughout our DFW service area.

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