The cash value is the amount of money paid into a policy that exceeds the premium costs and any fees that are associated with the policy's administration. This extra money is saved in a separate account, where it accrues interest at a rate determined by the policy proponent. This account, in the normal course of affairs, will be linked to a financial index, bond or mutual fund.
Why might someone want universal life insurance coverage?
Universal life is for the wealthy, for the man who needs higher coverage than would be available from term cover, who can afford to pay a higher premium and is in a position to contribute more money into building up a cash value.
Variable universal coverage
Variable universal is a sub-category of universal life insurance coverage. It remains a permanent life assurance policy, but the cash value is more likely to be linked to mutual funds instead of indices or bonds. Mutual funds carry greater risk, as they are more unpredictable, but can also be far more profitable in the long run. If you opt for this type of assurance, make sure that you are fully au fait with how it works and with the inherent risks; be clear on the fact that you might have to sustain a loss, and be sure that you could afford to wear it.
Comparing universal to whole-of-life coverage
The variability of mortality costs and expense projection rates is what distinguishes universal in the first instance from whole-of-life. Similarly, there's a differential in the respective surrender values. With universal life, however, the policy owner incurs no investment risk to the policy's cash value, and he retains the option to change both the premium and the death benefit amounts. The other option with universal is to be able to suspend payments for a spell if necessary.
0 comments:
Post a Comment