List of Pros and Cons of Universal Life Insurance
It is only natural that a person would want to provide financial protection for their family in case of an unforeseen accident. To achieve this goal, most obtain some form of life insurance. Universal life insurance is one of the more common life insurance products that people choose.
Is life insurance the right selection for you and your family? The time has come to examine the pros and cons of this form of life insurance and see if it is the best choice for you and your loved ones.
List of Pros of Universal Life Insurance
1. Provides Flexibility
If flexibility is what you are in search of, then universal life insurance is a great choice to ensure that your family will be taken care of, even if tragedy strikes. Universal life insurance allows for certain fluctuations in a person’s economic status. Depending on what your personal circumstances, you can opt to pay a higher premium or a lower premium.
The market is constantly changing and shifting in ways that can be tough to predict. Even those who are on strong financial footing can decide that they would prefer to pay a lower premium when the market is in bear mode and up their monthly premiums when the market rebounds and becomes bullish. This allows people to make more, depending on their strategy for interest crediting.
2. Availability Of Cash Value
As mentioned, the future can be very tricky to try to predict. By increasing the value of your policy as time goes on, you are able to handle any sort of financial calamities that may arise. There is no need to have to cancel your universal life insurance policy in order to receive full cash value for the money that you have already spent.
You are able to keep your policy, in full force, and still ensure your family’s protection. Should you be forced to borrow money, you have the ability to withdraw from the cash value that you have already built up. Not only do you and your family retain any cash value that is not used, but your death benefits also remain completely untouched.
3. No Need To Worry About Premiums
It’s no secret that adding a universal life insurance premium to your already sky high stack of bills each month can present an interesting challenge. Should the owner of a universal life insurance policy find themselves in a position where funds are tight and they are unable to pay their premium, there is no need to fret.
If you cannot pay the premium, the insurance company will pay it for you, by deducting the amount owed from the overall cash value that you have accumulated, which can be very convenient during times of significant financial hardship.
List of Cons of Universal Life Insurance
1. Much Higher Costs
The universal life insurance policy is much more costly than the other policies that a person has to choose from. When compared to Term Life Insurance, universal life insurance typically costs at least three to four times as much. All of the other fees and additional charges tend to add up, as well.
Universal life policies carry a much higher amount of administrative fees and the insurance itself also costs more. Premium fees and allocation fees are also much higher. While you can borrow cash from your accumulated total value, not only must it be paid back, but the insurance company will charge additional interest on top of the amount borrowed.
Depending on the particulars of your personal policy, any money that you borrow from your accumulated cash value can lead to a significant reduction in the death benefits that your family is able to receive.
2. Cash Value Must Be Monitored
Some people like to choose a life insurance policy that they can simply shove into a sock drawer and easily forget about. If this describes you, then universal life insurance policies are not for you. Forgetting about the policy and just paying the monthly premiums is not the best course of action to take when it comes to universal life insurance.
A universal life insurance policy requires that you pay attention to your cash value at all times. In addition to keeping track of any and all development with your cash value, you must also make frequent results for in force illustrations of how the cash value is performing.
Unless you are someone with a great deal of experience and savvy in the world of investments, a universal life policy may not be the best choice for you.
3. Fluctuating Costs Related To Mortality
It is important to exercise a certain level of caution when you are choosing a life insurance policy. Some policies carry two choices, one of which ensures that the payout your loved ones will receive in the event of your passing never changes. This is known as Level Cost Of Insurance.
However, the second option, which is also known as Yearly Renewable Term, experiences fluctuations in the mortality payment available to your family. These policies are inexpensive for younger persons and cost more as you get older. Those who experience annual increases in their mortality expenses need to ask for frequent illustrations from their insurance provider, so that remain up to date on the standing of the policy.
If you do not want your loved ones to experience a lower mortality payout, you will need to purchase a rider that guarantees that your death benefits remain at the same level for the entirety of the policy.