Universal Variable Life Insurance

Many different types of life insurance can be found on today's market, including universal variable life insurance, also known as a VUL. This type of insurance is very attractive to some because it is a protected insurance, one that will never lapse as long as payments are made on the account. A universal variable life insurance policy can not only produce great death benefits, but also cash and retirement ones in life, as well.


1. What is a VUL?

There are many different types of life insurance policies available, from many companies. VUL, or universal variable life insurance, is one such type. VUL is a type of insurance that has a cash value, such as whole life insurance. The same as any life insurance policy, death benefits are paid out at the passing of the policy holder, to the beneficiaries specified in the contract. This type of policy holds a cash value that has tax-deferred growth as it matures. A policy holder of a VUL is permitted to choose the way the premiums of their policy are invested. The cash value and death benefits may fluctuate with the ever-changing world of investments.

The name comes from a couple different places. "Universal" means that the premium is not set, but can vary within a specific range. This is unlike whole life insurance, which has a set amount. "Variable" means that the policy holder is permitted to invest in whatever option he or she wants, within the limits of the policy. Your investment may either return more money or cause you to lose money, so it should be handled carefully and with much consideration. If an investment is doing poorly, it is entirely possible that the premiums will rise in order for your policy to stay in force.

2. Protection

Buying universal variable life insurance is a terrific way to have permanent protection. This protection usually lasts through the age of 95. The only real requirement is that the policy premium is paid each period without fail. There are some policies that may require proof of insurability once in awhile to allow coverage to continue. Term insurance is always bought with after-tax dollars, but with a universal variable life insurance policy, pre-tax dollars can be used to pay the costs of the policy. The policy's cash value will continue to accumulate on a tax-deferred basis while it is in effect.

When buying life insurance, term insurance looks great because of the ability to buy a great deal of insurance at a small price. But it is best to get universal variable life insurance quotes when doing your research, as price is not the only factor to base a decision on. There is always the possibility that at the end of your policy, a health condition makes you uninsurable. With the permanent protection that a universal variable life policy gives you, there will be no reason to worry. Another advantage of this type of protection is that it offers a host of policy riders. With a term life insurance policy, you get a much smaller range of riders on your policy.

3. Cash Value Accumulation

Each of your universal variable life premiums has the ability to allow you to allocate a portion of them to not only one, but several investment divisions. It can also be allocated to a fixed-rate general account option. There are many ways to invest, but the most common are stocks, bonds, balanced, international, and money-market portfolios. While it may benefit you to invest, it is important to understand that earnings will fluctuate with the market conditions daily, and your principal has the chance of being at risk. Your investment earnings and premium payments will be your policy's cash value, less, of course, policy fees and charges. It is also important to note that if your policy has a decrease in its cash value, that it can decrease the whole amount of universal variable life coverage.

When you buy a term life insurance policy, it has no cash value to it. There is the option of investing the difference in growth-oriented products. An example of these would be mutual funds. The value will also differ according to the current market conditions that you have invested in. Looking into a universal variable life insurance policy is the best way to get a good cash value accumulation on your premiums. Get a quote today and see how well you can invest your money.

4. Flexibility in Today's World

One of the best parts of having universal variable life insurance is that you can change the amount of coverage according to your needs. With today's ever-changing world, this is an important part of looking for a life insurance policy. When increasing coverage, you may still have to provide insurability evidence.
If desired, there is also the ability to make a lump-sum payment that will increase the cash value of the policy. This lump-sum, however, will be subject to limitations set by the Internal Revenue Service. Another great advantage of having this type of coverage is that you may be able to skip a payment if you fall short of the means to pay one month. The policy would simply allow the accumulated cash value to cover the payment.

The difference between universal variable life and term insurance is that the cost for protection is lower with term. The disadvantage, however, is the fact that the face amount of a term policy cannot be changed. You must also make every payment each period or possibly lose the policy altogether. This makes having a universal variable life insurance policy a flexible coverage to have. Looking into this coverage is a great idea for those that will receive your death benefits.

5. Tax Advantages

All of the earnings from a universal variable life insurance policy in any of the investment divisions are on a tax-deferred basis. This makes the benefits from deferring current taxes very good for your money. With most universal variable life policies, the policy holder can have access to most of the cash value of the policy by taking a policy loan provision. These loans are typically tax free. Your amount of insurance could decrease, however, if there is an outstanding loan balance due. This is an important factor to remember

A universal variable life insurance policy can charge a surrender fee for any withdrawls.The tax treatment that is afforded to funds in a universal variable life policy is also on a first-in, first-out basis. Investment earnings are tax free the whole time the policy is active. The loans are tax-free, and the paid out death benefits are also tax free. This is only if the premiums were paid with after tax money. Those who are in higher tax brackets generally prefer having a universal variable life insurance policy. The benefits generally outweigh those that come with a term life insurance policy, depending on how much one earns.

6. Uses of VUL

There are many uses to this type of insurance. A universal variable life insurance policy can be used for financial protection. In the case of a premature death, death benefits will be paid out to protect a family in need. A VUL is popular because it is a permanent policy, and funds will be available at all times as long as the premiums are paid up. It will not lapse, like a term policy does. A VUL also offers an attractive tax advantage because it has a tax-deferred feature. If it is funded at a high amount, the tax advantages can possibly offset what the insurance costs.

Another great advantage of the cash value of a universal variable life insurance policy is that it may be used for education planning. This depends on when the policy is started, so it is beneficial to start one as early as possible. When a policy holder adds money into a VUL it can help their children qualify for any financial aid through the government. This is because they do not take the cash value of a universal variable life insurance policy into account when considering a family for EFC, or expected family contribution. A VUL is a great life insurance policy for many reasons, and many people can benefit from getting universal variable life insurance quotes today.

7. Benefits of a VUL

When purchasing a life insurance policy, the main reason is typically the death benefits that one gets to give to their loved ones. Protecting family is the biggest benefit of a life insurance policy, and a universal variable life insurance policy is no different. This type of policy has the ability to be structured so that the proceeds, both estate and income, are tax free.

Having a universal variable life insurance policy can be used as a tax-free income source for those in retirement. This can work as long as retirement is not in the near future when the policy is started-the proper funding of the policy must be maintained for this to work the best. Another advantage to a VUL is that those who have a large estate may sometimes use this insurance to their benefit. They may be able to avoid, or at the very least reduce, estate taxes by setting up an ILIT.

There are other advantages to remember when looking for universal variable life insurance quotes. The cash value of a VUL may be used as collateral when one wants to get a bank loan. This is a major difference from having term life insurance. Also, a creditor may not touch a permanent life insurance policy's value in cash, which can happen with a mutual fund.

8. VUL and Retirement

For those that need life insurance, having a type that can help out during their retirement years is a wonderful solution. A universal variable life insurance policy doesn't just cover a person's family after death. It can also help with additional income during the policy holder's retirement age. As long as a policy does not lapse, the owner may get to his cash accumulation income through a couple of different options, such as withdrawal and loan provisions.

Clients must understand before purchasing a universal variable life insurance plan that it is indeed a life insurance policy. But the many advantages it has for retirement can easily make this policy an attractive one. When purchasing this type of policy, it is wise to remember that any loans or withdrawals can and probably will decrease the benefits that will be paid at the time of death. Starting a policy early can increase the amount of protection one has, making retirement easier and death easier on the family it affects. Talking to a reputable insurance agent and getting universal variable life insurance quotes today can help plan for your tomorrow.

9. Thoughts to Consider

Before accepting a universal variable life insurance policy, it is a good idea to look around at a lot of different companies. Check out other types of insurance policies, such as term and whole life, to see what is right for you. If you decide on a universal variable life insurance policy, be sure to get all the facts and details before you sign the papers. The cost of a VUL's insurance rates is based usually on term rates. Be sure to fully understand the risks involved with investing in stocks and bonds. The insurer takes the risk of investments, and not the actual company, even though the money is invested through the insurance company.

A universal variable life insurance policy can be used inappropriately if not carefully monitored. The proper funding and investing are important for a VUL to give a satisfactory return on the money put into it. With the right planning, however, a universal variable life insurance policy can be a terrific investment, both for retirement and in death. It is always extremely important to look at several companies for the right policy, and to talk to a qualified agent. This type of life insurance can make both retirement and death easier on you, and your loved ones, and is worth investing in today.
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