Life insurance comes in many varied forms. The basic purpose of life insurance is to provide benefits for the policy holder’s survivors once the policy holder dies. One of the common types of life insurance is known as universal life insurance. Universal life is a form of life insurance where the policy holder pays for the entire cost of the insurance up front. In turn, the policy holder’s designated beneficiaries are guaranteed a certain specific sum of money once the policy holder dies.
Some people are offered this type of insurance as part of their workplace benefits. Typically, the worker’s survivors are offered insurance in the amount of a year’s salary. In other instances, people choose to purchase this type of insurance independently on their own from an insurance company. Many people choose to buy this type of insurance as a form of investment. The policy, if paid up, can be borrowed against before the person dies. This allows the person to have a fully paid up cash investment that can be tapped into as necessary.
In this way, the policy can serve as a form of investment. The policy holder will earn interest on his investment. This interest may be paid multiple times per year or on a yearly basis. The money the policy holder has invested in this type of insurance is usually invested in safe, low risk investments such as bonds and blue chip stocks.
This type of insurance can be collected once the person dies. The policy holder’s beneficiaries submit the necessary documentation to the insurance company. Once evidence of the policy holder’s death has been ascertained, the insurance company will pay out the money from the policy.
Universal life insurance allows the policy holder to have both insurance and an investment as the same time. The policy holder pays the premiums necessary. In turn, the policy that he owns will build up cash value as long as the premiums are paid. The policy holder can thus go through life knowing that his nearest and dearest survivors are guaranteed a tax free benefit once he or she dies.