UNIVERSAL LIFE INSURANCE - A LITTLE DIFFERENT

For starters, a lot of people think that an Universal life insurance plan is much the same as a term plan or a whole life plan. But in the way how an Universal life insurance plan is designed or even works, when you know about it, you will probably agree that it is a plan with a difference. In this article, we will explain to you on the working of an Universal life insurance plan, so if you wish to purchase these plans, you could take necessary action accordingly.

Listen to this if you wish to understand the working of an Universal life insurance plan – If your premium payments hover above the cost of the insurance plan, the difference amount is known as cash value. This could get cumulated depending on what you have chosen when you bought the Universal life insurance plan. Every month though, you could get paid the cash value plus the interest on the cash value. What this means is – You could pay an annual premium for your Universal life insurance plan and yet get back some amount of money monthly.

Mind you – This can happen only when the premiums you have paid exceed the cost of the insurance plan. Every insurer will calculate the cost of an insurance plan weighing the risk, the mortality rate, the agent commission charges and other overhead expenses. The moment your premiums go higher than these costs, you will find the cash value of the Universal life insurance plan accruing in amounts. And depending on what an individual has chosen with the Universal life insurance plan, the amounts would be paid out.

One of the biggest benefits of Universal life insurance plan is that it helps you bring in tax benefits. Any amount paid by cash by the Universal life insurance plan remains tax deferred until the policy is in force. In case, the policyholder dies, or if the policy is held until death, taxation will be deferred entirely. Economically, this is explained by the fact that the money with which you pay the premiums is already taxed, so it doesn’t make sense to make the insurance proceeds taxable.

Now, coming to the types of Universal life insurance plan! You will find Single premium Universal life insurance plans, Fixed premium and Flexible premium Universal life insurance plans. Each Universal life insurance plan has its own modus of working. Flexible Universal life insurance plan, as the name suggests, allows policyholders to decide on the amount of premium they wish to pay each time it is due. The Flexible Premium Universal life insurance plan also has two death benefit options namely A Level Death Benefit and A Level amount at risk.

It is important you understand the Universal life insurance plans in detail because they have so many variations to them. It is thus important for you to think of ways by which not only you invest in these Universal life insurance plans, but also save yourselves of taxes. Talk of tax savings and you probably know by now, how you can save being taxed. Never surrender your Universal life insurance plan, because the proceeds of which then can be taxed.