Oklahoma Insurance Professionals LLC Blog
We keep examining the different types of life insurance policies available to our neighbors here in Oklahoma City. We've looked at term and the a couple of permanent life insurance options, variable and whole.
Let's complete our look at permanent life insurance with a dive into universal life insurance. You should know about each of the options on the table when it comes to protecting your loved ones and interests.
What is a Universal Life Policy?
A universal life policy offers several advantages compared to other types of life insurance policies. Let's take a look at a few.
A universal life insurance policy offers policyholders the convenient and flexible option of choosing when and how much they want to pay in premiums. Unlike other types of life insurance policies, where the premium payments are fixed and set for a specific period of time, universal life policies allow policyholders to pay their premiums at any time and adjust their payments according to their financial situation.
This flexibility in premium payments is one of the key benefits of a universal life policy. It allows policyholders to make premium payments when it suits them best, giving them the freedom to contribute more during financially stable periods or to reduce payments during financially challenging times.
By paying premiums at the maximum limit, policyholders can take advantage of certain tax benefits and accelerate the accumulation of funds within the policy. This can potentially result in significant cash value growth over time.
However, it's important to note that maintaining a minimum payment balance is crucial to ensure continuous coverage. Policyholders must be mindful of the minimum premium requirement to prevent the policy from lapsing or losing its value.
This balance between flexibility and responsibility ensures that policyholders can adapt their premium payments to their unique financial circumstances while still ensuring the long-term sustainability of their coverage.
Cash Value Accumulation
Cash value accumulation is a key feature of universal life insurance policies. When policyholders make premium payments, a portion of the payments are allocated towards the death benefit, which provides financial protection for beneficiaries in the event of the insured's death. The remaining portion is credited to the cash value account.
The cash value account is tied to the performance of investments, such as stocks, within the policy. Depending on the performance of these investments, the cash value can grow or experience losses. It's important for policyholders to understand that there is potential for both growth and loss in the cash value component of their policy.
The cash value provides policyholders with flexibility and options. It can be utilized to cover premium payments, ensuring that the policy stays in force, even in times of financial hardship. Additionally, policyholders have the option to make withdrawals from the cash value, providing access to immediate funds for various financial needs. Another option is to borrow against the cash value, which can be useful for emergencies or other expenses.
In some cases, policyholders may choose to cash out the policy entirely, terminating the coverage and receiving the accumulated cash value. Alternatively, they may choose to donate the policy to a charitable organization, which can provide some tax benefits.
When it comes to financial planning, considering the tax benefits of life insurance policies is essential. In Oklahoma, a universal life policy offers tax advantages that make it a wise choice for many individuals.
One significant benefit of a universal life policy is the tax-deferred growth of the cash value component. This means that the policyholder does not pay taxes on the investment earnings as long as they remain within the policy. As a result, the cash value accumulates faster due to the absence of annual tax obligations.
However, it is important to understand that withdrawals from the policy may be taxable, depending on the policy's cash value and death benefit. When taking out cash, the policyholder needs to be mindful of potential tax implications. Cash withdrawals reduce the policy's death benefit, and if too much cash is withdrawn, it could result in a tax bill for the policyholder.
There are downsides to taking out excessive cash from the policy as well. If the policy's cash value is depleted, it may no longer be viable or "in force." This means that the policyholder might lose the tax advantages and life insurance coverage associated with the policy.
Ability to Change Coverage as Needed
When considering Oklahoma life insurance options, a universal life policy offers policyholders the ability to change their coverage as needed. This flexibility sets universal life insurance apart from other types of policies.
With a universal life policy, policyholders have the option to adjust both the death benefit and premium payments. This means that as life circumstances change, such as marriage, the birth of a child, or changes in financial obligations, policyholders can increase or decrease their coverage to align with their needs.
Additionally, policyholders can customize their coverage by adding riders to their universal life policy. Riders such as the Level Term Rider or the Flexible Care Benefit Rider provide additional benefits to policyholders. For example, the Level Term Rider allows policyholders to add a term life insurance component to their policy, providing an additional death benefit for a specified period of time.
It's important to note that universal life insurance policies have a duration of coverage and a maturity date. The duration of coverage can be for the policyholder's entire life, ensuring protection for their loved ones. Once the policy reaches maturity, policyholders may receive a lump-sum payment, which can be a useful financial tool for retirement or other financial goals.
Types of Universal Life Policies Available in Oklahoma
When it comes to life insurance, there are various options available, each offering different features and benefits. One such option is a universal life insurance policy, which provides flexible premiums and a cash value component that can grow over time.
These policies not only offer death benefit protection but also provide cash value accumulation for policyholders. In Oklahoma, individuals have access to a range of universal life insurance policies, including indexed universal life insurance (IUL) and variable universal life insurance (VUL).
Indexed universal life insurance allows policyholders to participate in the stock market's upside potential while still providing downside protection. On the other hand, variable universal life insurance allows policyholders to invest in various investment options, potentially increasing their cash value growth.
Both types of universal life policies offer the flexibility to adjust the death benefit and premium payments as per the policyholder's needs.
Oklahoma residents looking for a life insurance policy with flexible premiums and potential cash value growth can consider a universal life insurance policy as a suitable option.
Oklahoma Life Insurance Pros Can Help
When it comes to choosing the right life insurance policy, seek assistance from professionals who understand the unique needs of individuals in Oklahoma. That's where Oklahoma Life Insurance Pros come in. We wake up, live, and sleep Oklahoma City.
Our insurance experts have in-depth knowledge of the various life insurance policies available and can guide you and yours towards the best coverage options for specific circumstances.
From understanding the benefits of different policies to customizing coverage to meet specific needs, these experts are invaluable resources. Relying on our expertise can provide peace of mind and financial security for the future.
Have insurance needs? Don't know if you do, but wonder if you have proper coverage?
Talk to the pros today.