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Universal Life Insurance is a flexible-premium, variable benefit, life insurance policy that accrues value over time. The flexibility of universal life insurance allows the policyholder to vary the amount of life insurance as the need for insurance changes.
Universal life insurance accounts maintain a cash value, which can grow significantly over time. From premiums paid on the policy, an administrative fee and the cost of insurance is subtracted. The money left over accumulates in an account balance that earns interest. This means the effective total value of the policy will build over time. Simply stated, the value of the plan is as follows:
Total Policy Value = Insurance Value + Account Balance
If necessary, withdrawals can be made from the cash value of the account. Because of the higher payments necessary to build account balances, universal life insurance premiums are generally higher than those of term life insurance or whole life policies. |
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