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Universal Life Insurance

Universal life (UL) offers flexible premiums that can give you the option to make higher premium payments when you have extra cash on hand or lower premium payments when money is tight. Once the policy has enough cash value, the flexibility of UL insurance generally allows you to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums of the policy guidelines. You also can reduce or increase the death benefit (which may reduce or increase your premium payment) should your needs change.1

In addition to the death benefit, another important characteristic of universal life insurance is a feature known as cash value or cash-surrender value. These types of policies can earn interest and build cash value over time, as well as provide a death benefit to your loved ones.

When you pay your premium, administrative fees, applicable rider charges and other insurance costs are deducted from the amount you paid. The balance of your payment is applied to your cash value account, and continues to build with each premium payment. The cash value account may also earn a current interest rate offered by your insurance carrier. Generally, over time your policy can develop a cash value available to you in the form of a policy loan2 or partial surrender.

Benefit features like a No-Lapse Guarantee1 can be very useful to help protect your policy. With an ordinary universal life product, the policy could lapse under certain circumstances (e.g., interest rates fall below projections, insurance costs or administrative expenses rise, etc, which can affect your ability to make premium payments). With a No-Lapse Guarantee, you're guaranteed that the policy won't lapse for a specified period of time as long as premium payments are made within the time frame outlined by the company.

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1 Coverage is guaranteed for a certain number of years, depending on the policy selected, for all issue ages provided the no lapse guarantee premium requirement is met. If you do not meet the requirement significantly higher premiums may be necessary to keep the policy in force.  Paying a premium that is equal to, but not greater than the no lapse guarantee premium will keep the policy in force but may result in a negative or zero account value. By paying only the no lapse guarantee premium you may be forgoing the advantage of building more cash values.
2 Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract, as defined by Section 7702A of the Internal Revenue Code.  A policy loan or withdrawal from a life insurance policy that is a Modified Endowment Contract is taxable upon receipt to the extent cash value of the contract exceeds premium paid.  Policy loans and withdrawals will reduce cash value and death benefit.  Policy loans are subject to interest charges.  Consult with and rely on your tax advisor or attorney on your specific situation.