Posted: Fri Mar 17, 2006 8:09 am Post subject: Comment on Universal Life Policy
Hi,
I am not convinced as to whether the Universal Life policy is a Term policy or that it also has a savings feature . Is it possible for me to continue with this policy for as long as I am able to pay my premiums or would it get terminated automatically after a period of time ?
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Posted: Sat Mar 18, 2006 6:35 am Post subject: Universal Life
Hey !
It is quite possible that you get mislead while you are opting for a policy, since these are done mostly through brokers or over the phone. A UL policy might seem to be permanent initially but later on you might discover that it gets terminated after a stipulated time.
I used to believe that my UL policy would stay active for as long as I could pay for the premiums but now that I got the documents, it seems to remain active only till 2010 with no premiums and for another 7 years if I pay the premiums.
Posted: Tue Mar 21, 2006 4:53 am Post subject: Overfunding
A lot of factors have to be taken into consideration while deciding about a UL Policy. Overfunding of your premiums plays a key role in determining your future with this policy. Over funding indicates the splitting of your premium towards the cost of insurance and also another fund.
Sometimes it may so happen that the cost of insurance in a certain plan could be more than the premium and hence the difference would be deducted from the cash value of the policy.
So in order to determine the credibility of your policy, check out the nature of the premiums that you are paying.
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Unfortunely most agents/brokers that sell UL's, sell them as a cheap alternative to Whole Life Policy. What happens when you do this is in time usually around the 15th year or sooner the CV is no longer there as the COI (cost of insurance) eats away at the CV or Cash Value. This has taken a lot of people by shock esp starting in the 90's. As people age they had a mean trick played on them, there policies premiums sky rocketed.
This gave birth to the "Life Settlements", as they would buy the policy for about 10-20% of the cash value depending upon your age and health.
Now you can purchase a SGUL, Secondary Guarantee Universal Life Policy. This guarantees a level premium till age 90, 100 or even 120 years of age.
Regarding a UL life policy - the interest rate is key. If over the life of the policy the interest is less than what your premium was originally based upon, your premiums will need to increase in the future (perhaps substantially) or your policy will lapse sooner than you originally believed.
On the other hand, if you pay more than your "target" premium from the outset or the interest rate over the life of your policy is higher than what was projected when you first applied, you probably will be ok.
Assuming you always pay the target premium, watch the interest rate. Know what it was when you applied originally. Watch it every time you get a statement or at least an annual statement.
Also, every few years call the insurance company and ask for a new illustration showing how long your policy is projected to run.
Those tips should save you pain/aggravation down the road when your options become very limited.
