North Carolina Universal Life Insurance

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North Carolina Life Insurance

What Is Universal Life Insurance?

Universal life insurance is a flexible and permanent life insurance option that combines a death benefit with a savings or investment component. This type of insurance allows policyholders to adjust their premium payments and death benefits based on their changing financial needs.

Universal life policies consist of two main components: the cost of insurance and a cash value account. The cash value has the potential to earn interest or investment returns, and policyholders can use it to cover premiums, accumulate wealth, or make withdrawals. The flexibility in premium payments and death benefits distinguishes universal life from other types of life insurance. This adaptability makes it suitable for individuals seeking a life insurance policy with an investment component and the ability to customize their coverage based on their financial circumstances.

The benefits of Universal Life Insurance

  • Flexibility in Premiums: Universal life allows policyholders to adjust the amount and frequency of premium payments within certain limits. This flexibility is particularly beneficial during times of financial change or uncertainty.
  • Adjustable Death Benefit: Policyholders can often modify the death benefit amount, increasing or decreasing it based on their evolving financial needs. This adaptability makes universal life suitable for individuals with changing circumstances.
  • Cash Value Accumulation: Similar to whole life insurance, universal life policies accumulate cash value over time. The cash value grows on a tax-deferred basis, and policyholders can access it through withdrawals or loans for various financial needs.
  • Interest Rate Options: Universal life policies may offer different interest rate options for the cash value component. Policyholders can choose between fixed interest rates, which provide stability, or variable interest rates, which may offer the potential for higher returns.
  • Income Tax Benefits: The death benefit from universal life is generally paid out to beneficiaries income tax-free. Additionally, the cash value growth is tax-deferred, providing potential tax advantages.
  • Loan Availability: Policyholders can borrow against the accumulated cash value of a universal life policy. Loans can be used for various purposes, such as paying off debts, covering medical expenses, or making a major purchase.
  • No Maturity Date: Unlike term life insurance, which has a specified term, universal life does not have a maturity date as long as the policy is adequately funded. This ensures ongoing coverage for the policyholder’s lifetime.
  • Estate Planning: Universal life insurance can play a role in estate planning, providing a source of funds to cover estate taxes or leaving a financial legacy for heirs.
  • Survivorship Option: Some universal life policies offer a survivorship option, covering two individuals under a single policy. The death benefit is paid out when the second insured person passes away, making it a useful tool for estate planning.

While universal life insurance offers various benefits, it’s important for individuals to carefully review policy terms, understand the associated costs, and regularly assess their coverage to ensure it aligns with their financial goals. Consulting with one of our Insurance Consultants can help individuals make informed decisions based on their unique circumstances. Talk to one of our consultants today… Contact Us

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