A universal life insurance policy can give your family the long-term financial protection they need. Learn how a policy from New York Life can ensure long-term financial protection.
Universal life is a type of long-term insurance. Some universal life policies build cash value. With universal life insurance, you can adjust the amount and frequency of your premium payments, within limits, and even increase or decrease your policy’s coverage to keep pace with your financial goals. While it may sound straightforward, it’s important to understand that all universal life policies are not the same. There are different product design details that can impact your policy’s performance1.
The two types of universal life insurance policies:
Universal life insurance products are usually for people who are looking for the most long-term death benefit they can get for the price of the premium. They also are more likely to monitor their policy periodically to ensure it stays on track. Many older people looking to convert their term insurance policy choose universal life because premiums tend to be lower than whole life.
Universal life insurance is known for its flexibility. A universal life policy allows you to adjust your premium payments and the death benefit amount depending on your needs. This means that if your financial health changes, you can adjust your policy and keep your family protected. This is how the policy works:
With universal life insurance, you have the potential to keep your coverage if you want to: up to age 80, 90, 100, or even 121.
Universal life generally provides more death benefit protection for the dollar than whole life, but not as many guarantees.
Universal life provides the ability to deviate from your scheduled premiums, within limits, allowing you to make updates to meet your changing circumstances. That flexibility can introduce more risk, however, so you need to monitor your policy regularly to ensure that it continues to meet your intended goals.
Cash value accumulation
Some universal life policies are designed to accumulate cash value, which can be used for a variety of purposes.
Beneficiaries typically do not pay federal income taxes on the death benefits they receive. In addition, any cash value grows tax deferred. And, if your needs change, you can usually access your cash value income tax free.
This option allows you to keep your policy in effect, even if you stop paying premiums, under certain circumstances. This protection can come in two ways: either embedded as a core feature in a guaranteed Universal Life policy or added as a rider for varying coverage periods in a universal life policy in which there is no guaranteed benefit.
Adjustable life insurance policies usually have optional riders. Some may include the Waiver of Premium and Accidental Death and Dismemberment riders
There are several options other than an adjustable life insurance policy to consider when purchasing life insurance coverage. Here’s how it compares with other common types of life insurance:
Term life insurance
Unlike adjustable life insurance, term policies offer coverage for a set period only, usually 10-20 years, and do not accumulate cash value. As a result, term policies are initially significantly cheaper. Many families count on term insurance for temporary protection, which can be more affordable than long-term coverage.
Whole life insurance
Whole life insurance offers permanent coverage and a cash value. However, whole life doesn’t offer flexibility around premiums and the death benefit.
Variable universal life insurance
Variable universal life policies also offer long-term coverage, but the cash value is invested differently than in an adjustable policy. With variable universal life, you choose from a range of investment options offered by your insurer.
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1Nupur Gambhir, “Universal Life Insurance: What It is and How It Works,” Policy genius, March 19, 2021. Policygenius.com
2Partial surrenders and unpaid loans, including loan interest, will reduce the cash surrender value and life insurance benefit, and may be subject to income taxes and a 10% IRS penalty if the policy is a modified endowment contract and the policyholder is not yet age 59½. Please consult your tax advisor for more information.
3The policy will terminate if, at any time, the cash surrender value is insufficient to pay the monthly deductions. This can happen due to insufficient premium payments, if loans or partial surrenders are made, or if current interest rates or charges fluctuate.
*The guarantees of life insurance are based solely on the claims-paying ability of the issuer. Guarantees remain in place as long as all premiums are paid.
Add the Oregon Policy Form Numbers for New York Life Universal Life ( ICC19-319 51P) and Custom Universal Life Guarantee (ICC18-318-54P)