how does universal life insurance work

How does universal life insurance work?

Let’s talk about universal life insurance. Think of it as a special type of insurance plan that can do two important things: provide life insurance coverage and help you save money for the future.

Here’s how it works:
When you get a universal life insurance policy, you pay a certain amount of money called a premium. Part of that money goes towards providing life insurance coverage, which means if something happens to you and you pass away, the insurance company will give a lump sum of money, called a death benefit, to your family or whoever you choose.

But here’s the cool part:
Another part of the money you pay goes into a savings account, called a cash value account. This cash value account grows over time, kind of like a piggy bank, and you can use the money in it for different things.

As the years go by and you keep paying your premiums, the cash value account grows because the insurance company adds interest to it. So, if you keep the policy for a long time, your cash value can become a nice amount of money.

The great thing about universal life insurance is that you have some flexibility. You can use the money in the cash value account for different purposes. For example, if you need money for a big expense like college or buying a house, you can borrow from the cash value account and pay it back later with interest. It’s like a loan from yourself!

Also, some universal life insurance policies allow you to adjust your premium payments or even change the amount of the death benefit over time to match your needs.

So, to sum it up, universal life insurance is a special kind of insurance that provides both life insurance coverage and a savings component. It helps protect your family financially if something happens to you and allows you to build up savings that you can use in the future. It’s like having a double benefit—a safety net for your loved ones and a way to save money at the same time.

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