Flexible, Permanent Protection with Universal Life Insurance How it Works

Universal life insurance (often shortened to UL) is a type of cash value life insurance, sold primarily in the United States. Universal Life Insurance premiums are paid into your policy’s account value (after a premium expense charge), where it earns interest. Every month, various deductions, such as a charge for insurance protection, are then made from the account value. You have the ability to take loans or make withdrawals from the account value for your personal needs. Loans accrue interest and unpaid loans plus interest and withdrawals will reduce the death benefit and cash value. The policy continues as long as the cash value is sufficient to cover the various deductions each month

Universal life insurance policies offer flexible premiums that may allow you to adjust how much you’ll pay each year by accessing some of the policy’s cash value (though you will need to pay the minimum premium amount or the policy will lapse). Depending on your policy’s potential cash value, it may be used to skip a premium payment or be left alone with the potential to accumulate value over time.

Potential growth in a universal life policy will vary based on the specifics of your individual policy, as well as other factors. When you buy a policy, the issuing insurance company establishes a minimum interest crediting rate as outlined in your contract. However, if the insurer’s portfolio earns more than the minimum interest rate, the company may credit the excess interest to your policy. This is why universal life policies have the potential to earn more than a whole life policy some years, while in others they can earn less.

• • The flexibility to adjust your premiums and coverage amounts**
  • Cash value that you may be able to borrow from while you’re still alive
  • Permanent* life insurance protection and access to cash values

Typical Uses for Universal Life Insurance

Provides for a family’s loss of income, mortgage costs, and educational needs
Access to cash value for life’s opportunities
Estate, special needs, and business planning

A Universal Life Insurance policy is a flexible way to help protect your loved ones and build tax-deferred cash value.

Features

Flexibility — You decide the amount of life insurance and premium payments subject to policy minimums.
Death benefit — Life insurance proceeds are generally income tax-free to the beneficiary.
The growth in cash value is tax-deferred under current federal income tax law.
Access to cash value — The cash value can be accessed to help with education expenses, provide a retirement supplement, or other personal objectives.

What is Indexed Universal Life Insurance?

Indexed Universal Life insurance is a permanent life insurance policy that has a “living” benefit in the form of cash value, in addition to a death benefit that is paid at death. The cash value in your policy earns interest based on either a fixed interest rate, an interest rate that is based on the increase in an equity or bond index or a combination of both. What makes Indexed Universal Life insurance unique is the ability to earn interest based on the movement of an external index (like the S&P 500®). With indexed based interest, you are likely to earn higher interest over time than with a fixed interest rate.

Indexed Universal Life insurance is a great tool for retirement savings because you are able to take advantage of a portion of the gains in the market when an index rises without having to take any of the risks when an index decreases. In other words, your money is at NO market risk! If the index goes down in any given year, you are guaranteed that your cash value will not decrease due to that market loss.

Not only are you able to save money for retirement through the cash value in your Indexed Universal Life insurance policy, if you were to die prematurely, your loved ones will also receive the death benefit of the insurance policy federal income tax-free.

Why is Tax-Free Retirement using Indexed Universal Life insurance so important?
You can access the money in your cash value through policy loans & that income is federal income tax-free! As mentioned earlier, life insurance is one of the very few ways to get access to your money tax-free. And, the policy loan (and loan interest, if any) does not have to be paid back as long as the policy remains in force! If the policy loan is not repaid, any unpaid loan balance will be deducted from the death benefit & the remaining death benefit will be paid to your beneficiary when you pass away.

And let’s face it, income tax rates are likely to increase in the future. You can also protect your retirement income savings from decreasing due to potential future income tax rate increases. You don’t have to worry about future income tax rates because your income will be tax-free!