Universal Life Insurance – an alternative to LTCI?

For some, Universal Life Insurance is a better fit than classic Long-Term Care Insurance, but there are also those who like to have both ULI and LTCI.

ltci plannersUniversal Life Insurance (ULI) is a flexible permanent life insurance. It can be described as a combination of life insurance and a savings element (similar to Whole Life insurance). The savings are invested, with the intent of making the money grow over time.

A major difference between Universal Life Insurance and Whole Life insurance is that with a ULI, you are allowed to use interest from your savings to help pay for the insurance premiums.

The flexible aspect of Universal Life Insurance means that you are allowed to review and adjust the death benefit, the savings element and the insurance premiums as you go along. There are many things in life that can happen that makes us re-prioritize things. Our circumstances change, and so does our needs and preferences when it comes to life insurance and investments.

Of course, instead of getting a ULI you could just purchase a standard life insurance policy and then invest the rest of the money directly.

What’s permanent life insurance?

Universal life insurance and whole life insurance are both examples of permanent life insurance. Permanent life insurance is a life insurance policy that (unlike term life insurance) do not expire when the insured reaches a certain age. Permanent life insurance combines the classic death benefit with a savings portion. This savings portion is intended to build up a cash value, and the holder of the policy is allowed to borrow funds with this money as security. This means that you can borrow money to fund long-term care for yourself or someone else. It is a more flexible solution than long-term care insurance, since you can borrow money for whatever you chose, e.g. to pay medical bills that doesn’t have anything to do with long-term care or to make a down-payment on a condo that is more suited to your old-age needs than you current home.

Variable Universal Life Insurance

The Variable Universal Life Insurance (VULI) has a flexible premium amount.

The investment part of the VULI will usually include “sub-accounts” which function similar to mutual funds. These accounts can give the insured exposure to stock and bonds, with the aim of offering a higher rate of return than for normal universal life insurance.

Equity-Indexed Universal Life Insurance

The Equity-Indexed Universal Life Insurance (EI ULI) allow you to tie the value accumulation to a stock market index.

Most EI ULI policies will come with a minimum guaranteed fixed interest rate + the indexed account option.