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Vistaplan Blog

Read the Vistaplan Financial Group blog: Universal Life Insurance, Term Insurance, Disability Insurance, Critical Illness Insurance, Super Visa Insurance.

Posted: 28 Jul '11

How Does Universal Life Insurance Work

How Does Universal Life Insurance Work

Universal life insurance is the name given to life insurance that gives a person the option to build up a cash value.  Although different companies call these plans by a different name they are all a form of Universal life.

One of the features of all Universal life contracts is that you can make any deposit you choose between the minimum amount and the maximum amount for a given amount of life insurance.

For example if your policy has a death benefit of 500,000 dollars.  The minimum amount you must deposit is the amount that would cover the cost of the life insurance itself.  If the life insurance cost (called the mortality cost), was 3,000 dollars per year than the minimum you would have to deposit would be 3,000 dollars.  But this same contract would have a maximum amount you could deposit and that might be 8,000 dollars.

If you choose to deposit the 8000 dollars the insurance cost being 3,000 dollars, the difference of 5,000 dollars gets left in the cash value account.  When this cash value account has the 5,000 dollars you can then choose an investment option and interest from that investment option would be credited to your cash in the account.

If you had enough money in your account so the interest earning equalled the insurance cost you could stop your premiums and let the interest cover the cost and carry the policy.

By paying the minimum amount and covering the life insurance cost you have a level to age 100 term contract.

Although Universal life contracts are complicated they do provide a lot of benefits and options and once set up could be a big advantage in the future.

I would always suggest that you take the time and have the agent explain all the options because you might not use them all now but you might in the future.  Great contracts when set up right.


About the Author - David Motkoski

David Motkoski—At the Helm of Vistaplan Financial Group

The team at Vistaplan is led by David Motkoski, a well-respected insurance adviser to hundreds of business and individual clients. David has 30+ years of experience in this industry helping clients understand their life and disability insurance, office overhead, critical illness, long term care, and accident insurance. David’s focus has been medical doctors, dentists and business owners who are concerned with having the right coverage to provide for their family or business and protecting their income

David is an independent broker offering policies with Manulife, ivari and RBC to name a few. Vistaplan Financial Group has clients dating back to 1983 and they stay loyal with David because of the strong relationships he builds.