While term insurance has a benefit period with a start and end date, universal life insurance (UL) is a permanent policy that covers you for life. Like whole life, another form of permanent insurance, UL has a savings component that build up cash value (CV).
UL is a great asset for some people, but not so much for others. Today we will explore the pros and cons of UL so you can see if this is the right insurance product for you.
· Unlike term insurance, the premium can remain level for the duration of the policy. Term insurance rates are guaranteed to increase with age.
· The investment portion of a UL policy is very low-risk. Volatile markets have very little impact on the CV or premium.
· UL is less expensive than whole life insurance, and in the long run, is often cheaper than term (when comparing the later years of both policies).
· UL policies are very flexible. Age guarantees can be over 100 years. This is necessary to accommodate our population that is living longer than previous generations.
· UL makes a great supplemental policy to term. For example, a cheap term policy can cover the life of a mortgage and remove the necessity to have a higher UL benefit (and therefore premium) that covers the insured for life.
· To start with, you’ll have a higher premium payment than with term. This evens out or even reverses during the later years of the policy.
· UL policies can be very confusing. You must work with a broker that is comfortable in explaining all the ins and outs of UL.
· When it comes to premium payments, missing a payment can cause the policy to lapse. For a time the CV can support the policy, but this is not ideal if the CV is being held for retirement or any other savings purpose.
Universal Life Insurance Sales are on the Rise
In the past, the complexity of UL policies was blamed for their lack of popularity. However, there has been a recent surge in UL sales.
Research conducted by LIMRA, then later posted in The Insurance and Investment Journal shows a recent growth in sales of 14 per cent in premiums. This number increases to 20 per cent when you include monies deposited by policyholders into the accumulation funds. Meanwhile, premium sales for term life insurance increased by only 7 per cent. When it comes to overall policies sold in 2015, UL insurance dominated the second quarter. The sale of whole life policies rose just 4 per cent during this time.
Is UL the Right Choice for You?
UL is a wonderful policy for lifelong protection at level premiums. When purchased while the life insured is young, UL premiums are very affordable, have a long CV time horizon, and allow for increased protection without the need for a medical exam.
Is this the right policy for you? Contact one of our advisors today to discuss UL and all your other life insurance needs.