Tuesday, March 12, 2013

What is a Universal Life Insurance ?

Universal Life Insurance is a type of permanent life insurance characterized by flexible premiums, flexible face amounts and death benefit amounts, and its un bundling of pricing factors. The distinguishing characteristics of a universal life policy is its flexibility, both in terms of death benefit amounts and premium amounts, and its un bundling pricing system.

Each universal life policy specifies:

  1. The mortality charge that the insurer will apply. 
  2. The interest rate that the insurer will credit to the policy’s cash value, and
  3. The expense charges that the insurer will apply. 

The most attractive feature of this is , universal life insurance policy gives the policy owner a great deal of flexibility, both when he purchases the policy and over the life of the policy. When he purchases the policy, the policy owner decides the policy’s face amount, the amount of the death benefit payable and the amount of premiums he will pay for that coverage, within certain limits. The policy owner can change these choices during the life of the policy, but the insurance company must approve certain type of changes.The owner of a universal life policy can determine, within certain limits, how much to pay both for the initial premium and for each subsequent renewal premium. The policy owner also has great flexibility to decide when to pay renewal premiums. The insurance company imposes maximum limits on the amounts of the initial and renewal premiums in order to ensure that the policy will maintain its status as an insurance product.