Understanding Universal Life Insurance
- Date: 2008-06-26 - Word Count: 348
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When planning for your family's future and financial well-being you may consider taking out a life insurance policy. A life insurance policy can do more than cut a check to your family upon the event of your untimely death. Life insurance policies can also be used as investment vehicles that can carry significant tax benefits. This article is going to discuss Universal life insurance. What it is, how it works, and its use as an investment.
So, what is Universal life insurance? Universal life insurance offers some benefits and flexibility not allowed by other types of life insurance policies. Universal life insurance is a type of permanent life insurance, meaning that you will be covered until the death benefit has been paid, or you opt out of the policy for whatever reason.
A major benefit of a universal life insurance policy is the flexibility that it offers. You may increase or decrease the amount of coverage that you receive. You may also control the amount and the frequency of your payments. You may choose to increase or decrease the premium and you are also allowed to make lump-sum contributions.
Another benefit of universal life insurance is that at accrues cash value. The money you pay in premiums to the insurance company is invested in stocks, mutual funds, and other various investment vehicles intended to increase the value of the policy. The money earned in your life insurance policy will also be tax-deferred meaning that as long as the money is invested it is tax-free, you would pay tax on it once a payment has been distributed. However, if you need some cash you may also borrow against the cash value of your insurance policy. Since borrowing money is not considered income you would not pay tax on that money and any interest you pay on a loan may be able to be written off on your income tax return.
The investment possibilities and flexibility of universal life insurance make it a good option for a lot of people. However, you should always consult a competent professional on these types of financial matters.
So, what is Universal life insurance? Universal life insurance offers some benefits and flexibility not allowed by other types of life insurance policies. Universal life insurance is a type of permanent life insurance, meaning that you will be covered until the death benefit has been paid, or you opt out of the policy for whatever reason.
A major benefit of a universal life insurance policy is the flexibility that it offers. You may increase or decrease the amount of coverage that you receive. You may also control the amount and the frequency of your payments. You may choose to increase or decrease the premium and you are also allowed to make lump-sum contributions.
Another benefit of universal life insurance is that at accrues cash value. The money you pay in premiums to the insurance company is invested in stocks, mutual funds, and other various investment vehicles intended to increase the value of the policy. The money earned in your life insurance policy will also be tax-deferred meaning that as long as the money is invested it is tax-free, you would pay tax on it once a payment has been distributed. However, if you need some cash you may also borrow against the cash value of your insurance policy. Since borrowing money is not considered income you would not pay tax on that money and any interest you pay on a loan may be able to be written off on your income tax return.
The investment possibilities and flexibility of universal life insurance make it a good option for a lot of people. However, you should always consult a competent professional on these types of financial matters.
Related Tags: life insurance, universal life, universal life insurance
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