Planning for your financial future includes making preparations for your loved ones after you pass away. You may currently financially provide your spouse, kids and other family members through your regular income, and your passing may create financial hardship for them if this income is no longer available. Universal life insurance is commonly purchased to provide death benefits to loved ones. However, this is a special type of coverage that is actually considered to be a financial asset. This is because it can accrue value over time.
With each premium payment you make toward your universal life insurance policy, a portion of the premium will be held in an interest-bearing account. Because of this extra amount, the total premium may be higher than other alternative life insurance policies. The interest rate is typically fairly competitive in comparison to a savings account, making it a safe, lucrative place to save money. The account balance can grow to a sizable amount over time, and you can borrow against these funds or cash out on the policy as desired later in life. If borrowing against the balance, keep in mind that there is not a loan qualification process to go through. You simply request the loan, and it is provided to you. Because of this unique feature, this type of coverage is also used for retirement planning, saving for investments and more. Some people will even use the cash value in their policy to fund their children’s college education. The cash value or the death benefits are also commonly provided to adult children when the named insured passes away, and the money is used as an inheritance or legacy.
If you are preparing to purchase universal life coverage, keep in mind that rates vary based on many factors. For example, your age, gender, residence location, occupation, lifestyle habits or hobbies, health status and more may be reviewed to determine your rates. Those who have factors that may contribute to longevity may have much more affordable rates than others. Keep in mind that you can adjust the amount of contribution to your interest-bearing account as well as your coverage in general to generate a lower premium.