Speaking of Universal Life Insurance…
What are the disadvantages of this type of insurance?
Universal life insurance is generally much more expensive in comparison to term life insurance options. While some of these added costs are going to be going into your account in the form of a cash value component, the rates that you are going to be earning on that money may not necessarily be netting you the best possible rates of interest. This is the reason why so many financial professionals end up recommending that you buy term life insurance and simply invest whatever difference there is. What this is going to do is to allow you to purchase the death benefit insurance that you need while still having an added layer of flexibility that you can use in order to invest the difference in any way, shape or form that you choose.
Variable Universal Life Insurance
This particular type of life insurance is actually quite similar in nature to universal life insurance but there is one serious difference that you are going to need to consider. With this particular type of insurance policy you are not going to be earning a specific interest rate when it comes to a cash value fund. Rather, you are going to be investing this portion into one or several of a variety of different vehicles of investment. You are going to be able to choose from a wide variety of different investment vehicles including mutual funds for example. What this actually means is that you are going to be given a much greater level of control of your money because you will be able to choose where you put it.
What are the advantages of this type of insurance?
You are still going to be guaranteed the minimum level of death benefit, provided that you are keeping up with the minimum monthly or yearly premium amounts. You are also going to be given the flexibility associated with being able to invest the insurance premium's cash value portion in nearly any way that you like. If you end up making wise investment decisions in the process, then you are going to find yourself being able to take advantage of a significant level of tax deferred earnings on the investments that you make.
What are the disadvantages of this type of insurance?
First and foremost, when you are being given the chance to potentially invest a part of your policy into investments that could potentially be risky, you could end up losing a lot of money if the market ends up turning south. If you experience a significant drop in the value of your insurance account, you could actually be putting your insurance policy in jeopardy.
Photo Credits: Leonid Mamchenkov
Originally posted 2009-11-19 03:08:23. Republished by Blog Post Promoter
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