Universal and permanent life insurance are two different things, so be sure you don’t confuse them, and, as with any insurance policy, make sure to read carefully the fine print before becoming one of the universal life policyholders yourself.
The permanent life insurance encompasses the universal type which first appeared in the 1980s. The universal life insurance combines some of the advantages of both the term and the whole life insurances, and enables you to save money at the same time. It is also more flexible than other types of life insurance, since the premiums can work as both insurance and a savings account.
Returns and premiums
The premiums can be adjusted to your particular situation and needs, and can be paid with the money from the savings component of the insurance, if that is more suitable to you. But this can also be a problem, since it can leave your savings account empty, and if the investment returns are still not enough to cover the costs, you might have to turn to your death benefit premiums, which means your retirement plans could be negatively affected. The reason is that the investing component of the insurance is closely tied to the bond and stock markets which can become really problematic if the returns on your investments are lower than projected initially.
Generally, though, there is a higher rate of return associated with the savings element of the universal life insurance as opposed to that of whole life policy. There is a catch, however: as you age, the death benefit premiums for your universal insurance rise. For example, the premiums for a 50 year old can cost twice as much as those for someone in their early 30s, and this can build up to rather hefty amounts over time.
The higher dividends, the overall affordability of the universal life insurance, and the fact that you can review all of the above, namely the premiums, the savings-interest and the death benefit, and adjust them accordingly, have turned this type of policy into one of the most popular choices with many families planning their retirement years.