Universal life insurance is a versatile insurance plan which provides permanent death benefit protection that can be customized and modified. These plans can evolve and be modified to meet the changing lifestyle, budget, and savings objectives of a policy holder. Universal life insurance plans also have unique tax sheltered investment capabilities which allow policy holders to invest additional capital above the typical cost of insurance charges in investments of their choice, which grow on a tax deferred basis.
Policy holders usually make a monthly or annual deposit to the plan. The costs of insurance and administrative charges are deducted monthly. The remaining portion is deposited into a tax deferred investment fund.
A universal life insurance policy allows the policy holder to structure the investment component in a manner that matches their personal risk tolerance level. Investment options include:
- Guaranteed investment accounts
- Accounts that credit interest based on the rates of return of:
- Stock or bond market indices
- Mutual fund investments
- Managed portfolios
Cost of Insurance options include:
- Yearly increasing cost of insurance (rates rise every year)
- Level cost of insurance (rates today will be the same in 25 or 50 years)
Clients can access this accumulated cash value at a future date through:
- A cash withdrawal
- A policy loan
- A collateral loan
