Insurance World

Universal Life Insurance is a type of insurance policy that not only provides protection in the event of the insured’s death, but it also serves as an investment option. It may earn money market interest rates. It’s flexible and allows you to increase or decrease the amount of insurance coverage you need throughout the policy term. Although it is flexible, there are certain parameters you must follow. The policy limit may not be decreased beyond a predetermined amount, and increasing the coverage may subject you to underwriting requirements. Always be aware of your policy’s terms and conditions.

How does it work?

With a Universal Life policy you are in control of the amount and how often you pay the premiums.

• You have the option to make lump sum payments which will increase the cash and death benefit value of your policy. The interest on the cash value of the policy grows tax-deferred.

• You may also, at times of financial hardship, lower the premium amount you pay. Realize, however, by doing this, the face amount of the policy will change because the difference between the minimum monthly premium and the lower amount you pay is taken from the policy cash value. Be aware that most companies, if not all, include an expense charge for each premium payment.

• Withdrawals – You may withdraw money from the cash value of the policy. Companies may have limits as to how many withdrawals you may take each year and what the minimum amount can be. Each withdrawal may be subject to fees or charges.

Rates:

Rates vary depending on the company. Some companies guarantee that the account value will earn interest at the company’s current interest rate. Other companies have come out with policies where rates are guaranteed, regardless of the interest rate the insurance company pays.

The best advice is to shop around and always know what’s in the fine print.

There’s good news for those shocked by rising payments on interest-only and adjustable-rate mortgages. It’s possible an insurance product may help eliminate some of the stress.

Interest-only loans and adjustable-rate mortgages, made popular when interest rates dipped below 5 percent, made low monthly payments possible even when borrowers put little or no money down.

However, many homeowners are now seeing payment increases as low introductory rates increase and interest-only periods end.

Experts believe the increases are contributing to rising foreclosures-up 45 percent in January, according to foreclosure listing service RealtyTrac.

“One trillion dollars worth of mortgages will reset to new interest rates next year-we could be facing a major crisis,” said Bill Ruh, Government Affairs Director of the California-based Citrus Valley Association of Realtors. “Buyers may think they can only purchase a home using a short-term or fancy combo loan, but the reliable 30-year-fixed mortgage is an attainable and secure option.”

While many have tried to avoid it in the past, new types of private mortgage insurance (MI) offer that secure option, providing a lower monthly payment than many combo loans.

One type of mortgage insurance, called “single premium”, lets buyers borrow the full amount needed, with no added monthly fees because the one-time premium is financed within one loan. And if the value of the home appreciates enough to cancel the insurance within the first five years, buyers receive a partial refund. In today’s real estate environment, mortgage insurance sometimes cancels in as little as two to three years.

Compare the savings on a “single premium” loan to a “piggyback” mortgage on a $175,000 home purchased with a 5 percent down payment.

The single premium loan has a $1,076 monthly payment, while the piggyback is $1,142 per month. If the mortgage insurance were canceled after three years, the single premium loan holder would receive a one-time refund of $1,630.

Said Kevin Schneider of Genworth Financial, Inc., “With single premium products, monthly payments are among the lowest, and homeowners have peace of mind knowing that payments will not fluctuate.”