What is Universal Life Insurance - Pertinent Explanations on Universal Life Insurance

Some people find it difficult to understand what exactly universal life insurance is and how it works. They might find it useful for them as soon as they find out more about its benefits and its features. If you don't know much about universal life insurance, keep on reading because once everything becomes clear you'll realize it's a great type of insurance.

So, what is universal life insurance? Universal life insurance works just like other type of insurance up to a point. It pays a death benefit to your named beneficiaries when you pass away. The difference is that universal life insurance policies also have a savings component. The amount of money that you pay as premium and exceeds the cost of insurance, goes into a savings account and builds up cash value.

Not only that a certain amount goes into a savings account, but you will also be paid an interest rate for this amount. The level of this rate is established by the insurance company when you buy your policy. Otherwise said, you have the chance to put money away for retirement years and that money grows in time.

There is also a subcategory of this insurance, called variable universal life insurance. The part of your premium that was supposed to go into the savings account is in fact invested in mutual funds or other financial instruments. It can provide great earnings, but it is also subjected to great risks. Earnings or losses from investments can fluctuate, so expect this in case you are interested in variable universal policies.

If your intention is to earn money from your life insurance, than universal life policies are right for you. You can incorporate them in your financial strategy and wait for long term benefits. If, on the other hand, you are only interested in the financial security of your family, you can also get whole life insurance.