May 07

Universal Life Insurance

Variable Universal Life and Final Expense Leads

Senior Sales Communication MagazineVariable Universal Life Insurance is a kind of life insurance policy. Variable Universal Life Insurance is often referred to as VUL. VUL is the life insurance policy that can build up cash value against premium payments made to the policy. With a variable universal life coverage insurance policy, any cash value that builds up can be invested in different kinds of accounts. In this manner, the variable life insurance is similar to a mutual funds investment. The insurance policy holder can make the decision as to which accounts he wants to invest in. Any cash value against the premium payments could also be invested by the policy holder in bonds or stock markets.

According to the latest Senior Sales Communication Magazin, because this insurance policy comes with an option to choose the type of account as well as value of the money within the account could vary, hence this insurance has the word ‘variable’ within the name of the life insurance policy. Additionally, the policy holder has a lot of flexibility in paying the premiums. Hence the word ‘universal’ within the name of life insurance policy. For premium payments, the maximum limit of a premium payment is decided by the Internal Revenue Service also known as IRS. Depending on this limit, premium payments can actually vary from month to month. They should only never exceed the maximum limit.

On the other hand, life insurance policies like whole life insurance policy has a set schedule of premium payments where the premium amount to be paid every month is actually fixed. There is no flexibility in this case. If any premium payments get missed, then the policy gets lapsed.

Variable Universal Life Coverage Insurance Policy falls under the Permanent Life Insurance category. This is because, death benefit is guaranteed.

If the insurance policy holder dies, then cash payout will be certain depending on the premium payment build up until that point in time. This is true if any cash value build up against premium payments is sufficient enough to cover cost of insurance. Most of the variable universe life insurance policies do not have an endowment age rule set in the contract. Endowment age is the age at which the sum total of cash value would equal the total death benefits as per the life insurance policy contract. For insurance policies like whole life insurance policies, the endowment age is usually set to 100 years. Hence, this becomes a key benefit of the variable universal life coverage over other policies like whole life insurance.

Whole life insurance policies only pay out death benefit equaling the face value amount that is mentioned in the policy. Once the endowment age is reached, the sum total of cash value that is paid out is equal to the face value amount. Hence, regardless of whether the insurance policy holder reaches the endowment age or dies, the insurance provider gets to keep any cash value that gets built up through the term of the policy. However, there are a few whole life insurance providers that allow insurance policy holders to invest any dividends that get paid out from the policy towards premium payments on the policy. This could increase both the policy’s cash value as well as its death benefit.

In variable universal life coverage, the investments made in accounts like stocks or bonds perform better and provide higher returns than the general accounts of the insurance providers.

This could lead to a higher rate of return from the variable universal life coverage insurance. In contrast, the whole life insurance policies have a fixed return policy. Also, because there’s no specific endowment age at which cash value would equal death benefit, the death benefit of the policy continues to increase with time. Both these benefits of the variable universal life coverage put together provide the customer with better advantages over the whole life insurance policy. This holds true even with the assumption that premium payments for both life insurance policies are the same.

Additionally, as per the rules of the Internal Revenue Service, the total cash value amounts of variable universal life coverage policies receive tax benefits within the United States. The total cash value amount in the life insurance policy can be invested, fetch returns and be tax advantageous as long as the definition of the life insurance policy holds true and the policy stays active. This investment which is tax free could also be used for insurance cost related payments within the policy.

Variable Universal Life coverage is also used by affluent individuals who provide money to their children on an annual basis. This money can be invested in VUL schemes, in addition to the money fetching returns and being tax advantageous, the transfer itself could be exempt from tax if transferred as a gift.

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