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Is there a Higher Risk with a Universal Policy?

Is there a Higher Risk with a Universal Policy?

A universal life insurance policy offers a form of flexibility as far as saving and investing that a whole life insurance policy doesn't and that is the fact that the premium can fluctuate. You are given a minimum and a maximum in which your premium is considered paid as long as you stay within that range on your payment schedule.

As for your payment schedule, this can vary. You may decide that you want to pay your premium on a monthly basis, every three months, every six months, or you may want to pay on an annual basis. As long as you pay within your established limit, you are paid up.

Cash Value

As you may already know, permanent policies have the option of participating in the investing activities of the life insurance company. This means that a portion of the premium that you pay is invested into the investments chosen by the insurer. You do not choose your own investments, but you should not worry too much about this fact.

You should not worry too much about this fact because the insurance company does not want you to lose because that means they do. Of course, the higher your premium, the more that is invested, so you can make the decision to pay your maximum amount so that you can have as much as possible invested rather than small amounts.

As the cash value is gained, it is gained in the form of dividends. Over time, this does accumulate, but it doe so slowly. When the amount is high enough, you can borrow from the cash value like a loan. Some even decide to turn in and cancel the policy completely so that they don't have to pay the money back, but it is best to make sure you are not leaving yourself uninsured if you do this. Borrowing can be the best route to take.


You should know that your dividends are not guaranteed. Whether or not you receive dividends depends upon the market conditions. If market conditions are bad, losses may be experienced and that means that a return may not be achieved. You don't lose, though, but, instead, you just don't gain anything for that period.

There is also an option where you can guarantee that your policy does not lapse as long as you have enough cash value within the policy to make sure it doesn't. You can actually use your cash value to make payments for you until it runs out. You are, however, lowering the face value of your policy.

And the last risk has to do with when you fill out the application for your universal life insurance. This is a risk that exists with any type of life insurance. That risk is when you may say on your application that you do not have a condition or you do not do something such as smoke or drink. Although a medical examination is done, it is your word on other things. Plus, you do have the option of a no-exam policy.

The risk occurs when you may state that you don't have a condition or you don't engage in a specific lifestyle that your insurer has two years to dispute. If you die within that period and it is found information on the application is false, coverage can be denied. So you want to make sure you're 100% honest on the application. All-in-all, though, the risk factor of universal life insurance is quite low and does not result in any sort of risky financial loss.

ING Transamerica Insurance and Investment Group American General Life Companies Prudential Genworth Financial Services SBLI Life Insurance Company

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