Advantages & Disadvantages of Ul Insurance

EXECUTIVE SUMMARY

Life insurance provides peace of mind in knowing that upon death of the insured, there will not be significant financial impact on loved ones. Life insurance can also be used for estate or business conversion. As a result of different financial circumstances, there are many types of life insurance products. This report looks specifically at the advantages and disadvantages Universal Life insurance, which is a type of flexible permanent life insurance.

The flexibility of Universal Life insurance is its most advantageous feature. Universal Life policies provide a transparent insurance product with the opportunity to adjust schedule of premium payments. However, increased flexibility can also be viewed as a disadvantage for some policyholders. Many policyholders would prefer to have less control over their policies in order to reduce the potential for their policy to lapse.

Universal Life policies also have a tax-advantaged investment account. In the event that a policy lapses, the policyholder would receive the cash surrender value which is the investment account value net of any surrender charges. Since policyholders are able to choose their investments, they can take advantage of potentially higher rates of return. Unfortunately, with increased potential for reward, there is also an increased risk for policyholders. Through credit spreads, the insurer passes on some investment risk, so the investment account is exposed to changing interest rates in the market.

In conclusion, policyholders need to choose an insurance product that best suits their needs and circumstances. Policyholders need to have a full understanding of how their Universal Life policy works for them.

1.0 INTRODUCTION

Many people purchase life insurance to provide financial security to their beneficiaries when they die. Life insurance is a fundamental product for families who wish to protect their children in the event of an unexpected death. Life insurance guarantees...