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DFS is alerting consumers who own or are thinking about buying universal life insurance policies to carefully review their policies, the sales illustrations describing how the policy works and all required information disclosures.
Over the last five years, DFS has received almost 1,400 complaints from New York consumers about universal life insurance policies. Many consumer groups and media organizations have also reported consumer issues with universal life insurance.
The Department has seen many cases of consumers who purchased universal life insurance and who made payments for years, thinking their premium payment would not change or that their coverage would remain in effect. But many found that their policies had lapsed (were no longer in effect) with little to no value due to declines in interest rates, market volatility and other factors, or they were required to pay large additional premium payments to keep their coverage in effect.
Universal life insurance is a type of permanent life insurance. Unlike term life insurance, which is meant for a specific period, such as 20 years, universal life insurance is in effect for the rest of your life (unless you stop making premium payments).
Some forms of universal life insurance also offer a cash value component. You can take money out of cash value via a withdrawal or loan. When you die, the insurance company will reduce the death benefit payout to your beneficiaries by the amount of any withdrawals or outstanding loans. But for some buyers, accessing cash value is more important than a full payout to beneficiaries later on.
Typically, guaranteed universal life has the lowest risk, while variable universal life has the most risk because the cash value is tied to stocks and bonds. On the flip side, you can potentially build more cash value with indexed universal life and variable universal life than guaranteed universal life.
One way to get a better perspective on a policy is to ask your advisor or agent to order a report from Veralytic on the suitability of the product for you. Veralytic is a life insurance analytics firm that measures the qualities of cash value life insurance products and the companies offering them.
The biggest difference between whole life insurance and universal life insurance is the cost: Whole life insurance is generally the most expensive way to buy permanent life insurance because of the guarantees within the policy: Premiums are guaranteed not to change, the death benefit is guaranteed and cash value has a minimum guaranteed rate of return.
In addition, many whole life insurance policies pay dividends. These are like annual bonuses paid by mutual insurance companies to customers, although not guaranteed. You can use dividends to pay premiums, add it to your cash value or simply take the money.
The key difference between whole life insurance and universal life insurance is that universal life insurance can have more flexibility. You can often vary your premium payments and death benefit with universal life. Whole life insurance has set premium payments.
Cash value in life insurance is really meant to be used during your life. Once you pass away, any cash value generally reverts back to the life insurance company. Your beneficiaries get the death benefit, not the death benefit plus cash value. That said, some policies will include cash value in the payout, but are more expensive.
Les is an insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Besides covering insurance, Les was a news editor and reporter for Patch and Community Newspaper Company and also covered health care, mortgages, credit cards and personal loans for multiple websites.
When you need death benefit protection, the right life insurance policy may also help protect against market downturns. Indexed universal life insurance (IUL) offers the growth potential of index-based interest crediting rates and the protection of guaranteed minimum interest crediting rates.
*For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Sec. 101(a)(2)(i.e. the transfer-for-value rule); arrangements that lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j).
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance products and their guarantees, including optional benefits and any crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency, or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company.
Buying a life insurance policy is crucial if you want to protect loved ones who rely on your income after your death. Plus, policies such as ones for universal life insurance offer a savings component, acting as an additional investment vehicle in your overall financial plan.
To help you decide which policy best fits your needs, we've done the research and created a list of the top-rated universal life insurance companies based on factors such as financial strength, customer service, and policy offerings.
State Farm offers universal life insurance policies for either one or two individuals, with varying coverage amounts starting from $25,000, $100,000, or $250,000, depending on the policy. The terms of when the death benefits are paid may also differ. For example, State Farm's Survivorship Universal Life policy pays out the death benefit when the last insured dies, whereas the Joint Universal Life product will pay out when the first insured dies. There are also a few rider options that you can use to customize your policy.
Nationwide offers eight universal life insurance plans, including two that are only available for New York residents. There are also a number of riders available if you wish to customize your policy, including accelerated death benefit, long-term care, premium waiver, and accidental death benefit. Each type of policy will have different ways in which policyholders accumulate cash value, so it's best to talk with an agent regarding your needs.
MassMutual offers three universal life policies, each with flexible premium payment options. Coverage amounts begin at $50,000, depending on the policy. You can customize your policy by purchasing optional riders such as estate protection, substitute insured, and disability benefit.
While the UL Guard (universal life) and VUL III (variable universal life) policies are meant to have one insured, the SUL Guard (a survivorship universal plan) offers a death benefit to beneficiaries when both insureds die.
A type of permanent life insurance, universal life insurance policies provide a death benefit and a cash value component. The death benefit will go to your beneficiaries when you pass away, and the cash value component is an investment vehicle in which you can earn interest. A universal life insurance policy will remain in force as long as there are up-to-date premiums.
Compared to other types of permanent life insurance policies, universal life offers a bit more flexibility. Policyholders can change the death benefit amount, and potentially lower premium payments if there is enough cash value accumulated.
The exact cost of a universal life insurance policy will depend on factors such as your coverage amount, age, gender, and health. You can expect to pay more than term life insurance policies because part of your premiums goes towards the cash value component.
Choosing the right universal life insurance company for your needs will depend on factors such as the exact types of coverage you need, the financial strength of a company, and its reputation for customer service interactions.
Choosing the best life insurance policy for your needs depends on factors such as whether you want to invest a portion of your premium and who relies on your income. A type of permanent life insurance policy, universal life insurance offers more flexibility, though it may be more complicated than other types of policies.
Universal life insurance is a type of permanent life insurance coverage, offering both a death benefit and a cash value component. The policy will remain in effect for the lifetime of the insured individual, as long as the premiums are paid on time. There are three types of coverage: indexed universal life, variable universal life, and guaranteed universal life.
Both universal and whole life are permanent life insurance policies, offering both a death benefit and cash value component. While either type of life insurance can help you use your policy as an investment vehicle, the main difference lies in the way the cash value grows over time.
However, for universal life policies, premiums will also vary depending on how well the investments in the cash value component fare. If you accumulate a large amount of funds, you can use some of this amount towards your premiums. 59ce067264