What is Universal Life Insurance and How Does it Work?

What is Universal Life Insurance?

Universal life insurance is a type of permanent coverage originally created in the 80’s to be a lower cost, more flexible alternative to whole life insurance.

As opposed to whole life, in universal life, premium payments are variable.  You can pay when you want, as long as there is sufficient cash value to pay for policy fees and cost of insurance.

How Does it Work?

If the policy performs well and policy costs stay low, it’s very possible that over the lifetime of a universal life contract, that substantially less premium may be paid into the contract than in the case of whole life.

Remember with whole life, they have to guarantee the coverage will stay in force for life, so that guarantee comes “at a premium”, if you’ll pardon the expression.

Not all universal life contracts have this sort of guarantee.  Your policy’s ability to stay in force will be based on several variables including the cost of insurance and interest rates, which are both variable, and the premiums you pay.

Since these are unknowns at the time of policy issue, you can run illustrations, or projections, showing how long the policy is estimated to stay in good standing.  But that’s only a preliminary estimate.

Universal Life Insurance Quotes

The quotes below assume excellent health, for a male, non tobacco user.  They are guaranteed universal life contracts to age 121, and build little to no cash value.  For a policy with cash value build up, you’ll need to call us for an illustration.

Age $100,000 $250,000
Male Age 30 $336 $841  PER YEAR
Male Age 40 $559 $1,291
Male Age 50 $809 $2,015
Male Age 60 $1,430 $3,530
Male Age 70 $2,600 $6,382
Male Age 80 $5,162 $12,689


Quotes are as of 2/28/2012 and are subject to change.

Universal Life Annual Statements

Your annual statement should give you two important dates.  One is the date your policy is estimated to lapse if you continue paying the scheduled premiums.  The other is the date it is projected to lapse if you stop paying premiums.

If you plan to make a change to your annual premium or withdraw or borrow from your cash, you should always request a new illustration.  You will want to request a new illustration at least once every year or two anyway, to compare it to your original illustration to see how it’s performing.

Universal Life Pros and Cons

The pros are premium flexibility and the possibility of paying less into the contract than in the alternative, a whole life policy.

Flexibility – Say you buy a UL and pay $500 per year into the policy for a few years and then get laid off from your job.  If you can only afford $200 that year, or nothing at all, your policy may still stay in force if it has enough cash value to support the costs.  Then the following year, you might pay double the premium to get the cash value back up to where it should be.

You might also have some unique interest crediting strategies, as is the case with indexed universal life, which allows your gains to track a major equity index, such as the S&P 500.  Some very attractive gains can be made in these policies.

Tax Advantages – You may also be able to borrow from your cash value account, accessing the cash tax free.  Some people stuff their UL full of cash, since the funds grow tax deferred.

Some disadvantages of UL would be expenses and surrender penalties, and the headache of maintaining them.

In most contracts, there are penalties to withdraw funds during the first 15 years.  Just yesterday, a client of mine came into the office to review his Aviva UL annual statement.  At 33 years old with only a $140,000 death benefit, he was charged $406 in expense charges, $46 for base cost of insurance, and a premium expense charge of $100.  So they charged him to pay a premium!

Again, most UL policies don’t have guaranteed riders, so they require constant vigilance and maintenance to be sure sufficient cash values are maintained to keep the policy in good standing.

Guaranteed Universal Life

As previously stated, some UL policies have no lapse riders that provide guaranteed coverage for a certain period of time, such as to age 100 or to age 120.  In these policies, you don’t usually get much cash build up, but at least you have a guaranteed death benefit for life and guaranteed premiums for life as long as you pay your premium on time.

The problem, of course, would arise when someone can’t pay their premium on time.  Once the “no lapse” benefit is breached, you would have the opportunity to backpay the premiums you missed, usually with additional premiums required to put the no lapse guarantee back in good standing.  But if you can’t do that, your policy will revert to the way a UL normally works.  The problem it will probably be in danger of lapsing, because again, cash value is usually sparse in these guaranteed policies.

Term UL Hybrid Policies

Some companies offer a universal life policy short “no lapse guarantee” duration riders, such as for 10, 15, or 20 years.  During this time, the premiums and face value are guaranteed to stay level, even if there is little or even no cash value.  So it acts like a term policy, but is actually built on a universal life platform.  After the initial term, the policy automatically converts back to acting life a universal life policy.

For more information about the types of life insurance including, term and whole life, see our “Types of Life Insurance” tab above.

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Term Life Insurance for Men Over Age 50

Over 50 yr old man - Life InsuranceMen, if you are over the age of 50 years old and need term life insurance, that’s great.  I’ve written this post just for you!

The primary reasons men purchase life insurance in their fifties are:

1.  Family Protection

2. Business Protection

3. Estate Planning

Let’s cover each of these below in terms of how much protection you need, and which type of policy suits you the best.  Please note if you are unfamiliar with the various options available to you, you may want to visit our article about Types of Life Insurance, and you can also use our handy calculator to help determine How Much Life Insurance You Need.

Term Life Insurance for Family Protection

Most of our clients over 50 years old who need coverage are purchasing it because they are still working, and need to protect their wife or children from financial ruin in the event of their demise.  If we take the example of a 51 year old man who makes $70,000 per year and has a $500,000 mortgage, here’s what I would recommend.

This man will probably work another 15 to 20 years before retiring.  That’s over 1 Million dollars his wife would miss out on if he were to die unexpectedly.  In his case, I don’t normally add in the balance of the mortgage, but recommend replacing his income for at least 15 years.  This way, his wife will be able to continue paying the mortgage and other bills if he dies.

If we assume a 3% inflation, and 6% earnings on the funds, our handy life insurance calculator shows he needs approximately $865,000 to provide an annual income to his wife of $70,000 for 15 years.  So in his case, we would probably look at quotes in the $750,000 to $1 Million range.

Business Life Insurance Over 50 years Old

Another popular reason men purchase life insurance in their fifties is for business insurance needs.  The most common business insurance policies are sold for:

  • Key Man Insurance – If you own a business with a key executive, board member, or salesperson who your business just could not survive without, your business should consider taking out a policy on that individual.
  • Buy-Sell Agreement – Many partnership agreements mandate life insurance be taken out on each partner for a quick and easy buyout in the case of one of the partner’s passing.
  • Non Qualified Deferred Compensation – Many owners set up cash value policies for themselves (executive bonus plans) and for their employees, since they are so simple to administer and to comply with ERISA.  Plus the plans can discriminate between which employees will receive the benefits.

You won’t use the life insurance calculator to determine the amount of coverage needed in the above situations.  For partnerships, the amount is typically already pre-determined in the buy-sell agreement.  In the case of key man insurance, the value of the employee or executive may be measurable, in which case 5-10X annual production is appropriate.  But in the case of a founder, director, key board member, etc., their value may be more intangible, and will depend if your company has planned for an unexpected death, has a succession plan in place, etc.

For company deferred comp plans, the level of death benefit is usually irrelevant.  Instead, a policy is usually chosen for its cash accumulation features and outlook.

If you own a business and have any of the needs above, call us at 877-996-9383 or you can get started by filling out the quote form to the right.

Estate Planning

When I refer to estate planning, I’m speaking specifically of advanced planning you may do with your attorney to provide for liquidity upon death, as well as putting a life insurance policy in place in preparation for estate taxes.

We don’t typically deal with this level of planning for individuals who are in their 30′s or 40′s, as under current estate tax law, and estate is not taxable at the federal level until it is valued at over $5 million dollars, and you can imagine that very few individuals in their 30′s and 40′s have accumulated that sort of money.  But we do get quite a lot of estate planning type cases from people over 50 years old, many of whom have done well in business or real estate.

Let’s take an example of a wealthy, 55 year old single man, who will enjoy a estate tax exclusion amount of $5 million dollars upon his death, per C. Tucker Cheadle, a renowned California trust attorney, and how life insurance can help him.  If we assume he has a net worth of $6 Million dollars, the excess $1 million above the estate exclusion amount would be taxed at a federal rate of 35%, according to Cheadle, if this man were to die.  That sort of estate would generate a $350,000 tax bill.

So our 55 year old gentleman has two choices now.  Will he allow his estate to be reduced by $350,000 upon his death?  That’s his first choice.  Or alternatively, if he is a healthy non smoker, he could purchase a guaranteed universal life insurance policy with a $350,000 death benefit for as little as $3,708 per year, which would generate an tax free, cash benefit of $350,000 upon his death.  (Please note most people use some sort of permanent policy for estate planning needs, rather than term life insurance).

With proper planning, even the $350,000 death benefit would be separate from his estate, effectively solving his estate tax problem.  Even if our 55 year old lives to age 85, he will have only paid $111,240 in premiums (thereby reducing his estate value by the same amount), and paying his estate tax bill for pennies on the dollar.

Questions for Men Age 50 and Older

Please feel free to contact us with your questions at 877-996-9383.  You might also see C. Tucker Cheadle’s article on gifting, trusts, and avoiding estate taxes here.

Indexed Universal Life

Before reading this article about indexed universal life, you’ll want to read and understand the basics of my previous article titled Universal Life Insurance Premiums, which offers an explanation of how universal life works and some sample quotes.

When you read about indexed universal life, what you’re dealing with is a particular method that the interest is credited to your cash value, which may offer a greater opportunity for interest earnings. When you’re dealing with universal life, the higher your cash value grows the better, since that ultimately means you can pay less premiums down the line, or pull more cash out of the policy, whichever you want.

What is Indexed Universal Life?
Many universal life contracts now offer an interest crediting strategy that’s tied to a major equity index, like the S&P 500. For example, rather than earning a non-guaranteed 4% per year, which is set by the insurance carrier, you might elect to try your odds in an indexed strategy, where you could earn as much as 8% or 10% in a given year, depending on the performance of the stock market.

One Year Point to Point Strategy with Cap
The most common indexed strategy is a one year point to point with a cap or participation rate. Say you pay $500 into your policy this year, and only $200 is needed for policy costs, and you’ve elected the one year point to point indexed strategy with a 8% cap, tied to the S&P 500.

In this case, your company would mark the current index value of the S&P. Say it’s at 1300 today. Then a year from now, one year after the $300 was allocated to the indexed strategy, the S&P’s level is marked again. Say it went up to 1360. That’s a gain of 4.6%. Your $300 would be credited with 4.6%.

But what if the S&P went up to 1500, a gain of 15.3%. Here your cap of 8% would come into play, and your $300 would be credited with 8%.

What if the Index goes down?

In most cases, the money allocated to a strategy tracking an index that stays flat or decreases during a segment, will make 0 gains for the year (or however long the segment is).  In some cases, a minimum guaranteed interest rate, such as 1%-2%, is available for index strategies over a 5 or 6 year segment.  This is the way Aviva Life Insurance’s 1 and 2 year point to point strategies work, which currently offer a 2% guaranteed minimum during the 5 or 6 year segment, respectively.  (As of the time of this writing, 3/1/12)

Quotes for Second-to-Die Life Insurance and When It’s Appropriate

Family Estate Planning using Second-to-Die Life InsuranceBy far, the most common type of life insurance purchased is on a single individual.  But in the right circumstance, a second-to-die life insurance policy may be exactly what you need.

A second-to-die policy is unique in that there are two insureds (usually spouses) and a death benefit is only paid out upon the second insured’s death.  So we have two lives covered, two deaths, but only one death benefit.

In most traditional types of life insurance sales, the proceeds are left to the surviving spouse for various financial needs.  Obviously, that’s not the case here, so let’s take a look at why someone would purchase a second-to-die policy.

The top reasons to purchase second-to-die life insurance are:

Estate Planning Purposes – Approximately 90% of these policies are purchased by couple’s with large estates, who may have an estate tax problem.  This is really a simple concept.  The first spouse passes an unlimited marital deduction upon his or her death to the surviving spouse.  Upon the second spouse’s death, their entire estate is subject to various forms of taxation (income tax, possibly estate tax, etc.)   So what better way to pay the estate tax bill than with a life insurance policy, which cost pennies on the dollar, and pays out an income tax free death benefit?

Support of Children – Since the death benefit does not pass to the surviving spouse, it is usually purchased with a married couple’s children in mind.  Perhaps there are unpaid bills or debt such as a mortgage to be willed to the children, and the parents don’t want to pass away leaving their children with a loan on the house.

Affordability – Second-to-die policies are, on average, 25-40% cheaper than purchasing a policy on just one individual.  The savings could be even more drastic if one of the spouses has some health issues, but the policy is issued anyway based on the good health of the other spouse.

Sample Quote for $1 Million Death Benefit

70 Year Old Male Individual Policy through Prudential, Preferred Health = $30,305 Annually

70 Year Old Male/Female Second-to-Die through Prudential, Preferred Health = $16,907 Annually

Cash Accumulation – Since the cost of insurance (COI) in these policies is so low, some people leverage them as investment vehicles to grow its cash value account.

Charitable Bequests – Perhaps you have a favorite charity or educational institution.  Many libraries have been named and scholarship funds have been created due to the proceeds of second-to-die policies from generous benefactors.  Perhaps you can’t afford a $500,000 outright gift, but you can pay $10,000 per year.  Leverage your dollars and buy a 2nd-to-die policy with your favorite charity as beneficiary.

Types of Second-To-Die Policies

The most common type of second-to-die policy sold is universal life.  All the big carriers such as Prudential, Met Life, and ING offer a 2nd-to-die option.

Protective Life is the only life insurance company I’m aware of that has term policy with this option.  You can purchase 10, 20, or 30 year convertible second-to-die term, and boy, is it ever affordable.

The only downside with Protective’s term policy is the best health class they’ll offer is Standard.  So if you’re both in excellent health, you get somewhat of a downgrade in health classification here, as the best you can qualify for is standard.

Do the two Insureds have to be Husband and Wife?

No.  You can have second-to-die policies with mother and son, siblings, 2 business partners, etc.

For example, I used to volunteer on the board of a private school in San Diego, which had been co-founded by two wonderful women.  You could make the argument that a 2nd-to-die policy would be appropriate for the school to purchase on them for succession planning.

You see, if one were to die unexpectedly, the other could take over her responsibilities, but when they’re both gone, you could argue the school could suffer from decreased attendance while the successor moves into his or her new job.

How to Get a Second-to-Die Quote

You may notice in the quote results, you won’t find an option for second-to-die policies, so to get a quote, you’ll need to call us directly at 877-996-9383.

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The Most Honest Review of Ohio National You’ll Find

Ohio National Life Insurance Company

Awesome ratings, Low premiums... This is a great little company!

I’ve been contracted to sell Ohio National’s products for three years now, and I’m contracted with a dozen or so other life insurance companies, so I think that makes be the ideal person to write an Ohio National Life Insurance review, as I can compare them to other carriers, and discuss the pros and cons of going with Ohio National.

#1 Advantage of Ohio National Life Insurance – Financial Stability

During these economic times, I get asked more and more frequently about a company’s financial strength and/or ratings.  After all, who wants to pay premiums for years into a life insurance contract, and worry about whether the company will be able to make good on a death benefit payout?

Fortunately, I never have a problem “selling” the stability of Ohio National.  They’ve been in business over 100 years (just celebrated their 100th anniversary in 2009, in fact).  And even after all that time, they are still a growing, vibrant company.  They’ve somehow managed to grow their individual life sales business for a remarkable 21 years straight.

Also they have over $30 billion in assets, and are rated A+ by A.M. Best, their second best of 16 ratings, which means their ability to meet ongoing claims obligations is “superior”, in the opinion of A.M. Best.  To compare their company size to a large cap insurance giant, Ohio National is pretty small.  For example, ING has over $362 Billion of assets under management.

Having said that, Ohio National still has a wonderful, successful history, and I’d feel comfortable recommending their products to anyone.  For more information, click here to Review Ohio National Life Insurance Co.’s history and financial info.

No Gimmicks – No Games

When you learn about the inner workings of how some insurance companies manipulate their whole life and universal life illustrations to show tremendous cash value growth, Ohio Life is like a breath of fresh air.  They don’t play those games.

Many other companies as of late, when needing to generate revenues, have increased their cost of insurance by increasing mortality expenses, which forces clients to add more premiums.  Ohio Life Insurance hasn’t raised mortality expenses ever, and has lowered them three different times.

Advantage #2 – Excellent Term Life and Whole Life Pricing

And what review would be complete without a discussion about pricing?  Well, Ohio National is consistently among the top 10 in pricing for term and whole life insurance on Term4Sale, as well as in my quote results as provided by Compulife.  Sign up for quotes using our form on the right to compare Ohio National with other companies.

Please also note that Ohio National’s offerings are not limited to life insurance in Ohio.  Their products are approved in most states.

Intangibles that Make Ohio National Great

One thing I like about Ohio National as an agent, is they offer a deferred compensation plan for their agents.  I don’t know of any other insurance company who does this.  Basically, if you meet a certain level of annual premium or sales, then they contribute to a deferred comp plan on your behalf at some percentage of your sales.  I’ve never done enough business with them to qualify yet, since most of my business is submitted through Genworth and Prudential, but the point is they take care of their agents, and I think that’s just good business.

A Couple Negatives… Possibly

The only issues I have with Ohio National is that their underwriting guidelines tend to be a bit more strict than at other companies.  So if you get a quote for a 44 year old healthy male, for 10 year term life insurance, and find that Ohio National shows up as having the lowest quote, assuming you can qualify for their best health class, just be careful to check with an agent to make sure you can actually qualify for that rate.

Here’s what I mean.  If you review Ohio National’s underwriting guidelines, you’ll see that they don’t currently allow blood pressure treatment within their Super Preferred class.  Also, their weight chart is not very forgiving.  So say you take Lisinopril and have well controlled high blood pressure, and are 5’10, 200 lbs, you’d have two reasons you couldn’t qualify for Ohio National’s best rating… your hypertension medication and your weight, since their max weight for a 5’10 person is 190 lbs for their best class.

If you applied to a company with more liberal guidelines, such as Genworth, you’d be able to qualify for their best class, and Genworth’s premium would end up coming in lower at their best class than Ohio National’s premium at their 2nd best class.

To be fair, you can argue that the reason Ohio National has been successful for so long is because they are more careful with their underwriting.  So even though they may not “give the farm away”, isn’t that actually somewhat a good thing for their policyholders, to know that they carefully and conservatively assess the risks they’ll insure?

No Internet Leads

The other issue I have with them is they don’t allow sales that come in from internet leads.  So for example, Select Quote or Accuquote don’t quote Ohio National, as well as many other life insurance agencies who primarily generate their leads online.  We do have a contract with Ohio National, however, and leads from our website have been approved as acceptable.

Maybe you can guess why.  How serious is the Google searcher for “cheap term life insurance quotes” about their life insurance search?  These type of internet shoppers get several quotes, and more competition leads to a lower placement ratio.

Again, I can defend them for their stance here.  Internet leads are not always the best quality leads.  A lot of the sales end up getting withdrawn.  So Ohio National has noticed that trend in their new business department, and one day said: ‘Hey, we’re spending time and money processing all these cases, and far too few of them are panning out’, so you could argue they made a good business decision in banning internet lead business.

If you liked this review, please also see our Monumental Life Insurance review and leave a comment, “Like” the article or Google Plus 1 it please.

Overall, I’m very happy with Ohio National, and would recommend them to anyone, including my closest friends and family, and anyone reading this post.  To request a term life insurance quote, please use our form on the right.  If you have any questions about my review, please call me at 877-996-9383.

How to Qualify and How Much You’ll Pay as an Adult

The best life insurance deals for adults found here

Everything you need to know about purchasing life insurance as an adult.

At Huntley Wealth Insurance, we help our clients find affordable adult life insurance, ranging from 10 year term life insurance to permanent insurance with level payments to age 120. We offer life insurance coverage to adults up to age 90.

Maybe you are an extremely healthy adult. We love healthy adults. We also put an emphasis on insuring individuals with health issues, though.  So if you have ever been diagnosed as having depression or hypertension, or whatever else you can think of, you will get the attention and care your adult life insurance needs require at Huntley Wealth Insurance.

As an added bonus, I want to share my picks for the top life insurance companies with you! It will help you navigate through all your options.

How Does Taking Medication Affect My Policy

Some insurance carriers are more liberal on certain medical concerns than other companies. Let’s say you have struggled with heart disease, for example.  Every life insurance company is going to price that impairment differently.  Having said that, the best strategy to acquire affordable term life insurance with medical issues is to apply with the insurance provider that will be the most liberal on your particular health issues.  We recommend speaking to an independent life broker who knows which companies are best for which medical impairments.

How is My Premium Calculated?

There are 5 main determining variables in calculating your premium. The first is how many birthdays you’ve had. Coverage at 49 years of age costs less than life insurance at age 66.  A younger policyholder will pay less than an older one.

Number two is sex.  Men are charged a higher premium than women. The third factor is how much coverage you want.  It’s obvious that $750,000 of coverage will cost more than $100,000.

Next is length of term. It costs more to lock in a level rate for 30 years than for 10 years. The last factor which determines your premium will be your health rating class. Most companies have preferred ratings, standard plus ratings, standard ratings, and substandard ratings.

Term and Whole Life – Which is Better?

Many of our adult clients buy term life insurance. Term is generally more affordable than whole life and its purpose is to provide temporary coverage, such as 10 or 20 years. That’s because life insurance is most frequently needed to replace income lost in the event of a spouse’s death. So if you think you will work 15 more years, a 15 year term policy may be the most suitable product for you.

You don’t build cash value in term life. 10 year term means the premiums stay fixed for 10 years, and 15 year term means the payments are fixed for 15 years, and so on. Whole life insurance provides guaranteed coverage, and builds cash value. If cash value is not necessary, you may really want a guaranteed universal life policy to age 100. Guaranteed UL’s may offer coverage for life, but you will not see the build-up of as much cash value and maybe none at all.

I’d Like To START – What’s My Next Step?

Please get a free quote using the form on the right. On the following page, you may request an application for the policy you’d like. Please note if you use our quote form, quotes appear on the next page. Other sites ask for much more. Or feel free to call us at 877-996-9383 for life insurance quotes by phone.

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