Mountain View Insurance – Universal Life Insurance
Universal Life insurance policies provide you with the tax free death benefit of a typical term life insurance policy. They also provide a cash value portion of the policy where your premiums will accumulate. They are extremely flexible and have many options through the available riders and endorsements.
Universal Life Insurance – How Much Coverage Do I Need?
The amount of death benefit needed for a individual, family, or business is usually dependent upon the debts, potential loss of income, and future costs of living. Universal Life insurance also has a cash value component, similiar to whole life, which can benefit you now and into the future while your alive.
Universal Life Insurance – The Benefits While Your Alive
A properly designed universal life insurance policy can provide you with many benefits while you are living. One of the key benefits is being able to access the cash value accumulation while your alive.
Cash Value in the policy – How it Works
The cash value in the policy is determined by how much you are contributing towards it, the cost of the insurance itself, and any fees within the policy. Every universal life insurance policy will illustrate the different scenarios depending upon these variables.
As the cash value grows you can access it in the form of a withdrawal or a loan. When accessing the cash through the loan provision it allows for a “positive arbitrage” situation. The insurance company will collateralize your cash value and give you a direct loan. This means that you can still gain appreciation on the total cash value amount while you are leveraging the cash value.
Living Benefits – Riders and Endorsements
There are many options, riders, and endorsements available with universal life insurance. Here is a short list to consider with brief descriptions.
- Waiver of Premium for Disability – this will allow the insurance company to pay your premiums in the case you are totally disabled.
- Chronic Illness Rider – this will provide certain living benefits if you cannot complete 2 of activities of daily living. Similar to LTC coverage.
- Terminal Illness Rider – this will allow you to access a portion of the death benefit while you are living if you are deemed terminally ill.
Universal Life Insurance – Indexed Universal Life Options
There are specific universal life insurance options available where the cash value is tied to an index (very similar to fixed indexed annuities in that respect). The policy’s cash value will appreciate based upon a chosen index such as the S&P 500. This indexed potential for growth is what allows the cash value to grow over time.
The insurance carriers often put caps, spread, or limitations on the growth because they also provide a “floor” to any losses due to the index. For instance, if the index has a negative year, the universal life insurance policy’s cash value will be level. Of course, the cost of insurance and fees still have to be considered during that time. The indexing ability allows for higher potential gains and in turn larger cash value accumulation.
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