Universal Life Insurance
Universal life insurance was created to provide more flexibility than whole life insurance by allowing the policy owner to shift money between the insurance and savings components of the policy. Premiums, which are variable, are broken down by the insurance company into insurance and savings, allowing the policy owner to make adjustments based on their individual circumstances. The low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder's circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.
So who benefits from a Universal Life Policy?
Since a universal life policy is an investment vehicle along with a life insurance policy, only people who feel they need life insurance into their 70's would benefit from a universal life policy. This would give the savings portion enough time to possibly accumulate into an investment. Most persons will not need life insurance that late in life, and in the case life insurance is not needed that late, it may be more beneficial to purchase a term life insurance policy and plan a proper retirement investment savings account such as a 401K or annuity.
If a universal policy looks right for you, there are a few important points to remember. First, make sure you plan to have the policy long term since you will need to have the policy in force at least 15 years to be eligible for any return of the policy. Second, make sure you have a knowledgeable insurance agent to review your other options such as term and whole life insurance.