Pros and Cons of Universal Life Insurance
Advantages of UL Policy
1. UL takes maximum advantage of preferential tax treatment of life insurance policies.
2. The insured can build a significant investment portfolio that includes tax-deferred income.
3. Tax-deferred investments can be totally or partially withdrawn at any time.
4. At death the total value of the investment account will be paid tax free to the beneficiary, in addition to the life insurance benefit.
5. The mortality charges and administration costs will be paid from untaxed investment income. The insured accepts the risks that future investment returns may be inadequate to fund the cost of insurance.
Disadvantages of UL Policy
1. The insured accepts the risks that future investment returns may be inadequate to fund the cost of insurance.
2. Policies that are funded with the minimum required premium are expensive relative to term-100 policies because of the extra administration costs.
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