Life Insurance Sub-Headings
Life insurance is a financial product that comes in any number of different categories. There are policies designed specifically for senior citizens, or specifically for people travelling into dangerous areas. One category of Life Insurance is Universal Life Insurance, which qualifies as a sub-category of permanent life insurance.
Permanent life insurance is a policy which remains in force from the moment that the policy is taken out until the moment of death, or a default on the terms of the policy. The insurer is not allowed to cancel the policy except with proof of fraud on the original documents. Universal life insurance is a relatively new product, and therefore is less well known than some of its neighbour policies. It is worth considering, as the right policy can offer greater flexibility and the potential for higher return rates than some other products.
Universal life policies generally include a cash account. The premiums from the policy go into increasing the cash account and interest is then paid on the account at a previously agreed rate. Money from this account goes into paying for the administrative costs of the scheme and for paying for certain mortality charges. The value of the policy upon surrender is then the remaining amount of cash that is left in the account.
Universal life policies guarantee a certain amount of death proceeds. The premiums and flexible because they can vary with the interest rate. If the interest rate is low then the customer may have to pay additional premiums to keep the policy in force, but if it is high then the dividends help reduce premiums. When interest rates are above the minimums required the customer can choose to pay less into the account, as his investment returns cover the remainder to keep the policy in force.
With Universal life policies the owner can usually select one of two death benefit options. The first pays the face amount at death, as the cash value is intended to equal the death benefit at the age of 95. The other option pays the face amount plus the cash value, as it is intended to increase the net death benefit as the cash values accumulate. This second option comes with a few further conditions. One condition is that in order for the policy to be legal it must not have large cash values attached to other policies of much lower worth.
Universal life policies are sometimes erroneously referred to as self-sustaining policies. In the 1980s, when interest rates were high, the cash value accumulated at a more accelerated rate, and universal life coverage was often sold by agents as a policy that could be self-paying. Many policies did sustain themselves for a prolonged period, but the combination of lower interest rates and an increasing cost of insurance as the insured ages meant that for many policies, the cash option was diminished or depleted.
Universal life policy is a different option for life insurance, but there are disadvantages to it that should be carefully considered. Whilst it is more flexible, this flexibility can result in people paying less than would otherwise be the case into their cash account, and thus having a lower payout than expected. As with any insurance policy the best option is to shop around and make sure that you are investing in the right policy. When looking for a good life insurance deal ASDA Finance is a good place to start.