Universal Life Insurance

Until the late 1980s, there were only two basic types of life insurance: term and whole life. Leaders in the insurance industry developed the universal life policy to provide a more efficient and effective permanent cash value life insurance plan, charging less for the death benefit and then also paying current interest rates for cash value accumulation.

Unlike a whole life insurance policy, a universal life policy can also provide the flexibility, if requested and priced from the beginning of your policy, for allowing your beneficiaries to receive the face amount plus all of the cash value accumulated as their total death benefit.

One of the more common uses of the cash value, however, is simply to offset the rising internal cost of the death benefit to keep premiums stable and affordable.  In this way, the universal life policy offered today has become more like a “permanent” term life insurance policy.  The interest that builds up within the policy is typically plowed back into the policy to keep the premiums constant.  The cash value life insurance selling point that was heavily used to promote these plans in the 1980s has been minimized or even eliminated in the modern universal life policy.  An affordable premium designed to remain steady for the rest of your life is now the main attraction of the universal life insurance currently available for sale.

Article added 08/16/2011  by Amber Douglas
Senior Market Advisor: Morgan White Group
amber.douglas@morganwhite.com

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