There are basically two types of life insurance policies today: The term life insurance and the permanent life insurance. Amongst these two types of policies, term life insurance is way cheaper than any other types of life insurance. You may ask around for permanent life insurance quotes and term life insurance quotes and compare them.

You would see the significant difference between their rates. But quality wise permanent life insurance has better features than its counterpart. With term life insurance, you are basically paying for the coverage alone. Some people even call it pure insurance as there are nothing else related to the account except death benefits. This is probably the reason why term life insurance is cheaper.
_ What is permanent life insurance?

As the name suggests, permanent life insurance is the best choice when it comes to life insurances. It provides adequate protection for your loved ones in case of misfortunate events. The best thing about this is that it does not expire like term life insurances. You are pretty much covered for as long as you are paying for your premium. Now, there are different types of permanent life insurance policies and the most commonly purchased of all is the Universal life insurance policy. So here’s a brief overview of universal life insurance:

Overview of Universal Life Insurance

Permanent life insurance has three sub categories: universal life insurance, variable life insurance and whole life insurance. Among the three, Universal life insurance policy is the most flexible and transparent of all. This is probably the reason why a lot of people are attracted to it. The policy is so transparent because it is not bundled rather it is broken down into different components such as expense, protection and savings. In another word, universal life insurance is both renewable term account and a savings account in one.
_Now, this is how it happens, when the policy holder pay his or her premium, the company will immediately take the fee for expenses and then rest of the premium will be added to the cash value. The death benefit and other related fees are then taken out of the cash value. Now, it is going to be your choice as to whether to put more money into the cash build up or the death benefit.

Universal life insurance policy is also very flexible. As mentioned earlier, you can dramatically increase your death benefit amount or increase your cash build up value. Either way, the insurance company may ask you for a requalification, so this privilege is not encouraged. Aside from that, you can also increase or reduce your insurance premium. Maybe because you need extra cash for that month and won’t be able to pay for the full amount of the premium or you got additional insurance like home mortgage insurance and won’t be needing wide coverage anymore. For whatever reason, you have the privilege to do this.
_However, you need to understand that if you have decided to reduce your premium the growth of your cash build up will also diminish because the amount you missed to pay will be taken out of the cash build up. But increasing your premium will speed up the cash build up. No matter which road you take, it is important that you do this in accordance to the insurer’s policy.

Federal Tax Law and Universal Life insurance

Now, it is important to note that when purchasing universal life insurance you need a clear construction of the insurance plan. Be sure to get a written explanation or contract of the policy regarding the Federal Income Taxes. There are times when the death benefit is not qualified as term life insurance, which puts the beneficiaries responsible for paying heavy taxes once the policy holder dies.
_It should also be included in your agreement that your dependents be reimbursed the amount paid Federal taxes if miscalculation on the taxes or any error in computation and in the policy occurs. There are times when the policy holder tends to pay higher premium for the death benefit and federal tax law rules this out as a type of life insurance. A lot of insurance companies are working around this to lower down the taxes charged to their clients to strengthen the value of the death benefits.

Variable Universal Life Insurance

Variable Universal life insurance policy is another matter that you should be concerned about considering it affects your coverage. Now, you already know that with universal life insurance policy, some of the premium does to your death benefit and the rest to your cash value. Now, with variable life insurance that accumulated cash value may be used as an investment. In which case, you will be responsible for looking for the right company, stock, bond, equity index and what not to invest your money. So consequently, if the stocks or whatever field you invested your money into is performing well, then your money will be earning too.
_But like with all investments, there is also the risk of losing all your investments in one go. So you need to be careful about the sector you choose and just how much risk you can tolerate. Now, all earning will be taxed as a form of investment, though it may be a little lower considering that this is an insurance policy.

The good thing is that it will not be taxed while the money is earning or is invested. It will only be taxed if you withdraw it. Now, withdrawing the cash value would mean affecting your death benefit. If you use your cash build up in form of additional source of fund for your retirement or for emergency purposes.

If you are planning to buy this policy be sure to first get multiple permanent life insurance quotes from different providers. Having more quotes will give better idea on just how much life insurance coverage costs. When choosing the right insurance company, be sure to make a background check before jumping ship. If you happen to already choose one, require them to give you a black and white copy of all agreements made.
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