Looking for permanent life insurance protection, but don’t want to be locked into a permanent premium or death benefit? Universal life insurance could be the right strategy for your needs. Universal life is a type of permanent life insurance that offers flexibility, along with cash value accumulation potential.
When you purchase a universal life insurance policy, you choose a death benefit amount based on your needs. The insurance company then analyzes your age, health, and other factors to determine the premium amount. As long as you meet the minimum premium requirements, your death benefit is in place for as long as you live. As cash value accumulates in the policy, you gain flexibility to change your premium amount, death benefit, and more.
Curious about whether a universal life insurance policy is right for your wealth management plan? Below are a few key points about universal life policies and how they may help you meet your goals:
Guaranteed Minimum Return
As is the case with all permanent life insurance policies, your universal life policy is broken into two different components. A portion of your premium is used to pay for the death benefit protection. The other portion is goes into a cash value account that can accumulate on a tax-deferred basis.
In a universal life policy, your cash value accumulates through interest payments. The insurance company pays interest into the cash value on a periodic basis. The interest rate is based on a number of factors, including prevailing interest rates.
Your interest rate can fluctuate from year-to-year. However, your policy will have a guaranteed minimum interest rate, so you’ll always know the least amount of return you’ll see in any given year.
Flexibility with Premiums and Death Benefits
One of the unique aspects of universal life is your ability to adjust the death benefit, premiums, and more. As you accumulate cash value, you can start to use those funds to make changes to your policy.
For example, you may use the accumulated cash value to skip premium payments or even to permanently decrease the premium amount. You could purchase additional death benefit coverage. Or you may even be able to adjust the death benefit downward as your needs change. While universal life insurance provides permanent protection, you aren’t locked into a constant premium or death benefit amount.
Tax-efficient Access to Cash Value
As you accumulate cash value inside your universal life insurance policy, you may decide to use some of those funds to supplement retirement, make a major purchase, or achieve other financial goals. Fortunately, your universal life policy allows you to tap into your funds in a tax-efficient manner.
You can take cash from your policy in the form of a tax-free loan. Simply put, you borrow money from your life insurance policy. You then repay the loan as part of your regular premium payment. If there’s an unpaid loan balance when you pass away, that amount is simply deducted from the death benefit. The loan provision gives you access to tax-favored income to fund retirement, emergencies, and much more.Ready to discuss universal life insurance and how it might fit into your strategy? Let’s discuss it. Contact us today at America’s Annuity. Let’s connect soon and start the conversation.