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Is Universal Life Insurance Worth It? Introduction

Is Universal Life Insurance Worth It? It’s a question getting asked a lot by Americans these days, given the high cost of living and not knowing what lies ahead. It’s only when it’s gone that many of us realize we should have life insurance. But don’t let it overwhelm you, we’ll explain it clearly and recommend if universal life insurance is suitable for you.

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What Is Universal Life Insurance Worth It?

Before we focus on what it means, let’s first look at what it is. With UL, your loved ones receive a death benefit and you have access to a cash value that expands with time.

Unlike term life, universal life insurance pays out if you live through all your years as long as you continue to pay the payments.

Flexibility is available: You can alter the cost of your premiums and how big your death benefit is when things in your life change. Amazing, isn’t it? Is the effort you put in really worth the reward you receive? Let’s explore.

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Why Some People Are Attracted to UL Insurance: It’s Flexible

Sarah, who is now 35 and a mother of two, took out a term life policy when she was 28. With higher income, she’s looking for insurance that safeguards her family and also gathers savings as time goes on. Universal life allows her to:

•             Update her policy rates

Decide whether to adjust Elizabeth’s death benefit up or down

With life insurance, you are able to take out the cash value for unexpected needs, paying for college or preparing for retirement.

Universal life insurance is more important to Sarah than only protecting her finances after she is gone. It’s designed for the long run.

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Positive Features of Universal Life Insurance

Here are some main reasons making many individuals say that adopting pets is worthwhile.

1. Lifetime Coverage

You can have coverage for life, unlike term insurance that only lasts 10, 20 or 30 years. This helps a lot when thinking about the future.

2. Cash Value Growth

Some of what you pay in premiums is saved in what resembles a savings account for you. With time, the cash part of your policy may grow without being taxed.

3. Flexible Premiums

Not ready to pay a high policy price upfront? That’s okay. You are able to select the amount and time of your payments.

4. Loan Access

Need money? When you take money from your policy’s cash value, you often won’t have to worry about taxes.

5. The possibility to invest in the country

A number of UL policies allow you to invest your cash value into stocks and bonds. Your policy can expand a lot if you invest wisely.

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Problems with Universal Life Insurance

Even though it can be great, universal life insurance doesn’t fit for every person. It’s important to keep an eye out for these factors:

1. Higher Cost

It’s a bit more costly than term life insurance. What you are buying is protection and profit for the long term.

2. Complex Structure

It’s not as easy to understand as most policies. Should you not bother with the terms and conditions, things might be hard to understand.

3. There is a Possibility of Missing the Next Meal

Should your cash value decrease and you stop making payments, you could lose your policy.

4. Investment Risk

When UL is tied to variable rates and stocks go down, the cash value you build up goes down as well.

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Who Are Universal Life Insurance Candidates?

If universal life insurance meets your expectations, it will be worth it.

•             You’d like your benefits to last your whole life

You may choose to pay higher premiums.

The focus is to earn cash value through your policy.

•             You hope to leave something for your family or meet your estate taxes

•             It’s important for your policy to be adaptable

There may not be a reason to change if:

•             You’re working with a limited budget

You do not need insurance for the whole time you live there.

•             The cash value side of insurance does not matter to you

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A Basic Guide to Help You Consider if It’s Worth It

Here’s how you can determine if universal life insurance is a good choice:

Step 1: Make Sure You Know What You Want

Do you just want to safeguard your family or also build up what you have saved? You can use UL for either plan, although it works well when your goals are set over the long term.

Step 2: Estimate Your Contributions

Examine what you have in your bank account. Do you think you can pay increased insurance premiums on a regular basis?

Afterward, compare what you have learned against other available technologies.

Check the key differences between term, whole and universal life insurance. Make sure you are aware of the deal you are paying for.

The next step is to speak to a Licensed Advisor.

An expert can explain policy illustrations and future projections to you.

Check your IT infrastructure every year.

Life changes. As a result, your policy should be updated. It’s important to regularly go over your policy each year.

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A True Story: John’s Plans After Retirement

At the age of 30, John, 45, signed up for a universal life insurance policy. He made sure to pay more than just his minimum and build up a strong amount of cash value. When he was 55, he used part of his retirement savings to help pay for his daughter’s wedding. At 60 years old, he’s intending to use the leftover funds for a more laid-back semi-retirement in Florida.

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How you can find alternatives to Universal Life Insurance

Still unsure? Alternatives to the first steps include:

•             Whole life insurance – Insurance for life that guarantees the cash value, but it’s not very flexible.

A term life policy is simple, cheap and designed to address short-term needs.

•             Final expense insurance – Pays for funeral costs, but usually has little coverage and is affordable.

All have things that make them good or bad. Which option you pick depends on your personal habits and what you aim financially.

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Final Verdict: Is Universal Life Insurance Worth It?

So, is universal life insurance worth it?

If you appreciate long-term planning, different options and mixing investments with insurance, a pension fund is a suitable choice.

No, if you want inexpensive and simple insurance.

Universal life isn’t the same for everyone. When the right person has it, insurance can support money matters and give reassurance.

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FAQs

Q: Is it OK to cancel a universal life policy?

But you could give up some of your money and be charged when you surrender the policy.

Q: What will happen if I do not pay my premiums anymore?

If using the cash value in your policy doesn’t cover everything, your insurance may stop.

Can I move my policy from being term life to universal life?

It’s often built into term policies that you can convert to another kind of plan later. Speak to your insurance provider for answers.

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Helpful Resources

Universal Life Insurance is explained by Investopedia.

•             Life Insurance Guide from Policygenius

NerdWallet has ranked the top life insurance companies.

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