Universal Life


    Universal Life (UL), like Interest Sensitive Whole Life (ISWL), is considered permanent life insurance. That is, it is intended to remain in force for as long as needed. Unlike ISWL, however, it does not guarantee the premium cost or the amount of cash value for future years.

    UL works like a combination of term insurance and an investment account. Regular deposits (payroll deductions) are added to the investment account which earns current interest on the balance. From that account is withdrawn each month the cost of insurance at the current age and administrative fees. Projections of policy performance are based upon expected rates for interest, insurance cost, and fees. While the rates may change, there are guaranteed minimum interest rates and guaranteed maximum costs stated in the policies. If projections work as expected, cash values build up over time and may become sufficient to support the policy for life.

    Because the policyowner assumes some of the risks, Universal life will usually project somewhat highter death benefits than ISWL, although the amounts are not guaranteed.

    Premiums typically start as low as $2.00 or $3.00 per week or whatever is required to purchase a minimum $5,000 policy at a given age. Usually rates are different for smokers and non-smokers, and are sometimes different for male and female, but not always.

    Coverage is usually offered on a guaranteed issue basis which means that no one is turned down for medical or other reasons the first time it is make available to an employee.

    Usually, spouses and dependent children are also eligible for coverage.

    Upon termination, an employee may maintain the policies at the same basic rate through direct payment to the insurance company. The only thing lost is the convenience of the payroll deduction.

    These policies are individually and personally owned by the employee. This type of policy is not to be confused with Group Universal Life which is a very different type of coverage.

    Not everyone wants or needs additional, permanent, individually owned life insurance, but for those who do this is an excellent way for them to obtain it. They get the advantage of group rates and the all the privileges of individual ownership.


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