Universal Life Insurance Explained for Beginners

​Universal life insurance is a combined life insurance with two alternatives, term life insurance, and saving option. This type of insurance allows you to build your savings and to have a life insurance policy. Universal life insurance offers the option for the client to make his premium payments through his accumulated savings, which is different from the whole life insurance. It also offers a long-term investment through the monthly payments.

​Where Do My Payments Go?
Your payment is separated into two portions. First, one part of the monthly payment goes to the life insurance which provides the death benefits for your beneficiary. On the other hand, the second portion is meant for the investment savings.

The point of this concept is that with time, the investment can replace the payment for the premiums of the policy. The benefit from this situation is when you pay for a few years, the investment can cover the costs for the premium and eventually, you will get whole life insurance without even paying for it.

What is Cash Value?
Even though the whole life insurance and the universal life insurance are both permanent coverage policies, the main difference is in the cash value. In the universal life insurance policy, the insurance company sets an interest rate minimum with every single contract. If this minimum is overperformed, the extra earnings can be transferred to the cash value of the policyholder.

The strongest reason that differs the universal life insurance from whole life is that with the first one you can earn more than the minimum interest rate. By the time the cash value becomes bigger, the policyholders can have access to the amount of the balance without affecting the death benefit.

How Can I Benefit from Universal Life Insurance?
The universal life insurance policy allows for the policyholders to take loans from the accumulated amount without any tax implications. But if any loan is unpaid, it may void the death benefit for the beneficiaries.

The best time to buy universal life insurance is in the mid 20’s or early 30’s so you’ll have the time to build your funds. By purchasing life insurance earlier, you can feel secure to have a life policy. At Old Bay Insurance Agency​, we aim to provide comprehensive insurance policies that makes your life easier. You can get more information about our products and services by calling our agency at (410) 777-5390. Get your free quote today by CLICKING HERE.