When a person buys term life insurance they are assured a death benefit as long as the premiums are paid in full and on time. However, some people like the idea of having some sort of savings plan tied to their insurance policy. Universal Life Insurance, also known as UL, provides a death benefit as well as incorporating a savings vehicle. So you have in essence a term life policy with a tax-deferred interest accumulating savings account attached that is calculated with current interest rates.
One of the potential benefits of owning a universal life policy is you may not have to pay premiums during the entire policy. That can happen if the tax-deferred savings portion of the policy accumulates high enough where it can pay the death benefit as well as the other related costs. Once it can pay for what is wrapped into the policy then the access money can start to pay the premiums. This in not guaranteed and should never be sold to you as such.
This type of policy will benefit a very specific person; one who feels they need life insurance well into their 70′s. This gives the policy enough time to accumulate enough cash value into the savings portion of the policy while providing the insured a guaranteed death benefit. Just like with all types of savings vehicles, it is tied to interest rates and takes time to grow.
The fact is that most people will not need life insurance that late in life. When you don’t think you will need life insurance at that time in your life, it might be more practical to purchase a term life policy early on and plan a proper retirement investment savings plan such as a 401K at your work or an annuity of some kind. It’s hard to make these types of decisions sometimes because we cannot know what will happen in the future. This is why it is imperative you sit down with someone who can help you plan ahead as best as possible.
Remember, if you are looking at purchasing a Universal Life Insurance Policy here in Nashville, Tennessee or anywhere else in the world, it needs to be in force at least 15 years in order to see any return on the savings portion and for many more to really have the kind of value we all would like to see. And do not buy one of these policies without good input from a qualified, licensed agent.