universal life insurance

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Universal Life Insurance

A life insurance policy that combines features of term life and whole life insurance. That is, a person pays a premium and, in exchange, receives at least a guaranteed death benefit (as with term life insurance). Additionally, one has a cash value account that may be invested and may offer a higher return for the policyholder. A person may use the funds in the cash value account to pay premiums, increase the death benefit, or even serve as collateral for a loan. Premiums are higher for universal life policies than for other forms of life insurance.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

universal life insurance

A combination of term life insurance and a tax-deferred savings plan paying a variable return. This combination was developed during the early 1980s when interest rates rose to very high levels and caused the public to view regular whole life policies unfavorably.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Universal life insurance.

Universal life insurance is a type of permanent insurance that offers flexible premiums and a flexible death benefit.

Your tax-deferred cash value account accumulates at least the guaranteed rate of interest, but may accumulate at a higher rate if market rates are higher than the guaranteed rate.

You can use the money in your cash value account to pay premiums if there's enough available. And you can also increase the amount of the death benefit without having to qualify for the additional protection. This alternative allows you to build inflation protection into your insurance.

As with other permanent policies, you may be able to borrow against your cash value account, though any outstanding loan reduces your death benefit. You also get a portion of the cash value back, minus fees and expenses, if you end the policy.

However, universal life is a more complex product than straight life and the premiums are higher for a comparable death benefit.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The case involves universal life insurance policies underwritten by Aetna Life Insurance in 1997.
Aegon's subsidiary Transamerica announces an agreement that would resolve litigation challenging certain monthly deduction rate adjustments on universal life insurance policies in the United States.
Universal life insurance policies with long-term care riders may have accounted for 24% of premiums from new U.S.
Consumers can buy universal life insurance policies with flexible premium payment schedules.
The underlying collateral consists of a pool of universal life insurance policies and annuity contracts purchased on the lives of the insured individuals.
The low rates have also prompted policyholders to revisit interest-sensitive life insurance contracts, notably conventional universal life insurance policies, purchased to fund philanthropic objectives.
Life insurers face unanticipated liability from the continued low interest rates that undercut the returns they anticipated when they priced some of their universal life insurance policies with secondary guarantees.
The same is true regarding premium payment options in universal life insurance policies. Most studies are restricted to the paid-up option (i.e., stopping premium payments) in participating life insurance contracts (Kling, Russ, and Schmeiser, 2006; Linnemann, 2003, 2004; Steffensen, 2002).
In late 1998, Cochran and his insurance agent, independent of the trustee (not KeyBank) at the time, decided to replace all of these life insurance policies and the annuity with two variable universal life insurance policies, which had a total death benefit of $8 million.
partial withdrawals (surrenders): The policyowner's right in universal and variable universal life insurance policies to receive a portion of the accumulated cash value without a policy loan and without terminating the policy.
A Universal life insurance policies offer an investment element and a death benefit, while giving the policyholder the right to increase or decrease the amount of the investment element.

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