What Are The Possible Drawbacks Of Universal Life Insurance?

1. 

   63333 POINTS

   view profile
   Peggy Mace

   Most of the U.S.

   When addressing regular Universal Life Insurance ( as opposed to Indexed Universal Life or Variable Universal Life Insurance), the biggest drawback, in my opinion, is with policies that do not have a guaranteed death benefit. The disadvantage of this type of non-guaranteed Universal Life policy was more profound in the past, when they were taken out at times of very high interest rates. Those interest rates were projected into the future, and when the rates fell, many UL policies lapsed years ahead of their projections. This is preventable by taking out policies with guarantees not to lapse for x number of years, or to age 120.

   Answered on October 19, 2013

   flag this answer
2. 

   5877 POINTS

   view profile
   Stan Cox II

   Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii

   This is a very intelligent question I wish more people would ask! Universal Life Insurance is considered a "Permanent" insurance. Unfortunately what often isn't disclosed is that Universal policies have a continuously increasing 'cost of insurance' assessed annually. So while the premium may not be increased, what most often happens is that the cost of insurance fees eventually eat up whatever cash value had been accumulated until there is no more cash value. Then unless the premiums are increased to cover the shortage the policy will lapse. So it's better to think of Universal insurance as a longer version of Term insurance.

   Answered on September 2, 2015

   flag this answer
Did you find these answers helpful?
Yes
No
Go!

Add Your Answer To This Question

You must be logged in to add your answer.