Whole Life (Universal) for Parents Explained

Universal life insurance is a variation of whole life insurance. It’s is a newer form of insurance designed to offer a savings option, like whole life insurance, while being more flexible with its payment structure.

Like whole life, universal life insurance involves the insurance company using a portion of your premiums to invest in bonds, mortgages, and money markets. Many people like universal life insurance because it includes a guaranteed minimum interest rate - around 4% - that ensures a minimum return on your money.

If the insurance company does well with those investments you'll enjoy a higher interest rate and greater returns, if they don't do well you'll receive less, though never less than the guaranteed minimum.

Universal life insurance also allows you to choose one of two ways for your beneficiaries to receive money should you die:

So is universal life insurance for you? That depends on your age and the ages of your children.

Since universal life includes both life insurance and an investment vehicle, it makes sense that only those people who will need life insurance into their 70s should purchase it.
This means that if you're an older parent with younger children, universal life insurance might be a good bet.

A universal life insurance policy should also be kept in force for at least 15 years in order to get any return on the policy. So if you're looking for something less expensive or short term, this plan might not be for you.

On the other hand universal life insurance policies also offer more flexible payment options. This is useful for families who might not always be able to pay the same amount every year.

Just remember that if you pay too little for too long your policy will lapse, leaving you without insurance protection policy.

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