Monday, February 12, 2007

Universal Life Insurance Policy Longevity

What is Universal Life Insurance and how do I get the best Universal Life Insurance Quote?

Universal Life Insurance or "UL" as it is commonly referred to in the insurance industry is a relatively new concept. It is a permanent version of life insurance that is intended to be in force for as long as the client wants it to be in force. The determining factor in how long the policy lasts is the cash value, the amount of premium being paid, and the wording of the contract.

The cash value in a universal life insurance policy will build up on a guaranteed and a non-guaranteed basis. On the guaranteed side of the equasion, at inception the insurance company projects exactly what will happen to the cash value based upon known variables and minimally acceptable interest rates. If a policy has a guaranteed interest rate of, say, 4%, then the proposal for insurance will show what would happen to the cash value based upon 4%.

On the "non-guaranteed" side of the proposal for insurance (which becomes part of the policy), the cash value is shown in regards to the "current" interest rate that is being applied. This current interest rate fluctuates and is dictated by the insurance company through which you have the policy. The overall interest rate applied to new money coming into the policy as premium and the current cash values will never go any lower than the guaranteed interest rate but may go up to the current, assumed, non-guaranteed interest rate.

The amount of life insurance premium being paid into the universal life insurance policy is another factor in determining the longevity of the policy. UL is flexible in that you can put as much money into the policy as the MEC limit will allow (government regulates the amount of money you can put into a policy) and as little money as you want as long as you meet the company's minimum premium requirements. If you only put the minimum premium into the policy, the contract will offer a death benefit for a shorter amount of time. If you pay the prescribed, sometimes referred to as "target premium" or "designated" premium, the policy should last until age 100. Putting more cash into a universal life policy than the target premium can come close to the "MEC" or Modified Endowment Contract premium. The effect on the UL policy that this will have is a potential increase in the cash values.

Secondary guarantees in modern universal life insurance policies add another layer of security to the universal life insurance policy. These secondary guarantees that are implemented by the insurance companies and included in the wording of the contract basically state that as long as the prescribed premium (usually target premium) is paid in a timely manner and there are no loans or withdrawls on the cash value of the policy, the policy will last as long as the insured is alive.

Carefully worded insurance policies, current and guaranteed cash value projections, and premiums being paid all have an impact on the longevity of a modern Universal Life Policy. Universal Life Insurance is a flexible contract that will allow as little as a minimum premium and as much as the governmental rules will allow. UL can be a good fit for anyone looking for a policy that would ensure long lasting, flexible coverage, with the potential for cash value and transferrability.


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