Life Insurance Quotes

The pros and cons of universal life insurance policies

07/22/11

People considering their options for life insurance may want to look into universal life insurance policies, which are offered by many institutions. Universal policies are versatile, allowing holders to set their own premiums and adjust their rates whenever life changes may require them to do so.

A predetermined percentage of the premiums are taken by the insurance provider and invested in various stocks, bonds or money market funds. The savings elements of universal policies grow on a tax-deferred basis, and a guaranteed minimum interest rate usually institutes a minimum return on investment, no matter how the actual investments perform.

Universal life policies earn cash value for the policyholder and provide the surviving family with death benefits. Many universal life insurance policies allow people to do things like choosing an elevated premium and then stopping payments for several years or depositing large lump sums that will cover the premiums for a number of years.

However, universal policies are not without risk and responsibility. Policyholders with a universal life plan are accountable for making changes to their policies on their own. Policyholders also take on the mortality and investment risks that come with universal life insurance policies. There is also a risk that if a policyholder maintains small premiums for an extended period, the policy could lapse and leave the person uninsured.

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