How flexible premiums can be both an advantage and a disadvantage of Universal Life Insurance?

How flexible premiums can be both an advantage and a disadvantage of Universal Life Insurance?

Expert Solution

Universal Life insurance refers to a life insurance plan that includes an investment savings element and low premiums.Most Universal life insurance policies will come with a flexible premium option.The policy can accumulate cash value unlike a term life insurance.The premium consists of two parts namely Cost of Issuance and cash value(accumulation)The cost of issuance is the minimum amount required to maintain the policy.Universal Life insurance also offers risk adjusted

Advantages of flexible Premiums

It allows the policy holder the right to vary his/her premiums within a certain limit.

It provides an investment savings element

It offers death payment and the cash value grows as tax deferred

Disadvantages

There will be a long term effect associated with variations in premium payment.

In order to remain as active the policy requires necessary cash value to pay for the cost of Issuance.

Fluctuation in return and increase in expenses will result in failure of savings to accumulate.

This is how flexible premiums can be both an advantage and disadvantage of Universal Life Insurance.

jeff jeffy answered 1 year ago

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How flexible premiums can be both an advantage and a disadvantage of Universal Life Insurance?

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