Universal Life Insurance

By Marilyn Katz

Can You Lose Money With Universal Life Insurance?

Are you worried about losing your money if you stop making payments on a universal life insurance policy? With some types of policies, this can be a valid concern. This concern is not just valid for people who by universal life, though, but with other types of life policies as well.

Some Basics Of Universal Life Policies

First take a moment to understand a little bit about how this type of policy works. It is a permanent form of coverage, like whole life, that guarantees to cover you as long as it is kept in force. This makes it different than term life which expires after a certain amount of time passes.

It is a bit different than whole life though.

For one things, you have more flexibility in your payment amounts.

• You will have a low payment that will keep your coverage in force. This is the minimum payment.
• You will have a high payment that you cannot go over to satisfy certain regulations. This is the maximum payment you may make.
• And finally, you will have a "target" payment. This amount is between the low and high payments, and it is sufficient to help you meet certain financial goals you had illustrated when you purchased your policy.

Note that I mentioned you needed to make a "minimum" payment in order to keep your coverage in force. If you stop making payments, and there is not enough cash to keep the policy in force, it can lapse. In this case, you can lose your money. If there is a large enough balance in the cash account, it could sustain the policy for a long time. If not, your policy could lapse rather quickly.

However, this situation is not really different than the one you would have with a term or whole life policy. If you stop making payments so your policy lapses, you could lose your coverage too. So, in any case, it is possible to let your account balances dwindle to 0 if you just stop making payments.

How To Keep From Losing Your Money With Universal Life

If you decide you do not want the coverage any more, there are a lot of better ways to close it out than to just stop making payments.

• If your policy is in force, and there is a balance in the cash account, you may ask the insurance company if you can cash in the policy. This means you can actually terminate your insurance and get a check for the cash balance.
• If you are not sure how much money you have in your cash account, and how long it can keep your policy in force, just call your insurance company or agent. They should be able to help you understand your policy, cash account, and your alternatives!
• If you are a senior citizen, you may check into senior life settlements. If you do not want your policy any longer, you may be able to find an investor who will actually pay you a portion of the face value in return for policy ownership. This is actually a way to cash in a permanent policy for an amount that is greater than the cash balance.

Should You Just Stop Making Life insurance Payments?
It is probably a bad idea to ever terminate a policy by stopping payments. In fact, you could even affect your credit report if you do this!

It should be simple to contact the company to tell them you want to cancel your coverage. But before you decide to terminate your contract with the company, make sure you really understand your choices.

Do you want to know more about insurance? Drop by to take advantage of our free consumer tips and free Online Insurance Quotes at any time of the day or night! Also, get universal life insurance explained for you.

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