Universal Life Insurance is a type of insurance policy that not only provides protection in the event of the insured's death, but it also serves as an investment option. It may earn money market interest rates. It's flexible and allows you to increase or decrease the amount of insurance coverage you need throughout the policy term. Although it is flexible, there are certain parameters you must follow. The policy limit may not be decreased beyond a predetermined amount, and increasing the coverage may subject you to underwriting requirements. Always be aware of your policy's terms and conditions.

How does it work?

With a Universal Life policy you are in control of the amount and how often you pay the premiums.

* You have the option to make lump sum payments which will increase the cash and death benefit value of your policy. The interest on the cash value of the policy grows tax-deferred.

* You may also, at times of financial hardship, lower the premium amount you pay. Realize, however, by doing this, the face amount of the policy will change because the difference between the minimum monthly premium and the lower amount you pay is taken from the policy cash value. Be aware that most companies, if not all, include an expense charge for each premium pay

* Withdrawals - You may withdraw money from the cash value of the policy. Companies may have limits as to how many withdrawals you may take each year and what the minimum amount can be. Each withdrawal may be subject to fees or charges.

Rates:

Rates vary depending on the company. Some companies guarantee that the account value will earn interest at the company's current interest rate. Other companies have come out with policies where rates are guaranteed, regardless of the interest rate the insurance company pays.

The best advice is to shop around and always know what's in the fine print.

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