Insurance with Potential Cash Value

The simplest and most cost-effective type of life insurance is generally term insurance, which provides coverage for a specified number of years, as long as you pay the premiums, and pays a death benefit if you die within that term. A term policy has no other value and is separate from your savings and investments.

Universal life and variable universal life insurance are more complex products that combine a death benefit with a tax-advantaged savings element. A portion of the premium pays for the pure cost of insurance. The remainder is invested with the potential to build cash value on a tax-deferred basis.

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Guaranteed or Variable?

A universal life (UL) policy premium is invested in the insurance company’s general investment portfolio. Most UL policies pay a minimum guaranteed rate of return and may offer returns above the guaranteed minimum depending on the performance of the insurance company’s portfolio. The policyholder has no control over these in