Life Insurance Question Pennsylvania PA
Reader’s Question:
Our eldest son is considering the purchase of a permanent life insurance. A man in his office has recommended he look into a Universal Life Policy. Is this some sort of new insurance? I have a whole life policy and have been happy with the results. What should we know?
James
Villanova, PA
Hi there, James.
Glad to hear that your whole life policy has lived up to expectations. Actually, universal life insurance is an offshoot of whole life. You and your son should get together with your agent and get all the details of a universal life insurance policy.
Flexibility is the key to universal life. Unlike whole life policies, universal policies allow for the increase or decrease of the death benefit. The same is true of the premium amount. The policyholder is responsible for maintaining the cash value of the universal policy. As you know, with whole life the premium is fixed at inception. Not so with universal life policies. The policy holder has some flexibility with the premium payments.
The cash value of universal life is linked to the policies interest rate. This has potential for greater growth than with a whole life policy, whose cash value is determined by the performance of the carrier’s operations.
Universal life has many tax advantages. At the outset, the premiums are greater than the cost of insurance. The surplus yields tax-deferred cash value. Remember the premiums were paid with after-tax income. Usually the growth is not taxable. This advantage also applies to any loans against a universal life policy.
James, if your son sees benefits in flexibility, he should look into universal life coverage. Again, your agent will have all the details.
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