With a Universal Life Insurance policy, say my premiums are $150.00 per month and I want to increase them to $250.00 per month, to increase the death benefit, will the death benefit be based on the date I originally purchased the UL or on the date I want to do the increase?

  1. 406 POINTS
    Coby Higgins
    Licensed Independent Agent, Texas Insurance Alliance, Little Elm, TX
    Assuming you have chosen option B for your UL, the full payout to a beneficiary is the face value plus accumulated cash value. If you overfund the UL, the additional amount is credited to cash which in time increases the payout to a beneficiary. You can also have the higher payment increase the face amount. Increases in face amounts are generally subject to new underwriting and that cost is rated based on a number of factors including age, health, & tobacco use. I would suggest having the insurance company run separate illustrations showing you the differences in your policy by how the additional cash is applied - either the growth by adding to the cash accumulation account or applying the additional amount to increase the face amount. Note that higher face amounts will cost more in the future and may deplete your cash accumulation account faster which may require additional funding to keep the policy inforce or it may lapse early. If you have a temporary need for additional life insurance, you can increase the face value now and lower it some day in the future. UL's are typically flexible to adjust to your needs which is why these are a popular long term option.
    Answered on May 4, 2017
  2. 165 POINTS
    Eddie Arriola
    President and Agent, Bow Tie Financial Group,
    There are two options to permanent life insurance: A and B. When signing up for a permanent (whole or universal) life policy, you have to pick one. After choosing A or B, it's locked in. Regardless of which you pick whatever is paid out when you die will be the death benefit - withdrawals taken and unpaid back.

    A is usually less expensive, as it is a level death benefit. This means as your policy gains value through premium paid, the death benefit will stay flat. Thus, if you have, say, a $250,000 death benefit and $350,000 in cash value, the death benefit will be $250,000.

    B is usually more expensive, as it is an increasing death benefit. As your policy gains value through premium paid the death benefit increases. Take the prior example: a $250,000 death benefit and $350,000 in cash value -- only now the death benefit enhanced by the cash value (minus unreturned withdrawals). The original death benefit doesn't technically change, it just pays alongside the cash value of the policy.

    Granted, this is somewhat simplified, though it's the basis for the full answer.

    If your policy is elected for option A (level), the death benefit won't increase.

    If your policy is elected for option B (increasing) the death benefit is bolstered by the cash value. How much that cash value enhances depends on the type of universal life policy you have, how well that particular carrier's indexes have performed, and how they calculate caps, floors, fees, and the like.

    To get an idea of what it may look like, you can call your agent or, if your agent isn't around anymore (hey, it happens) the carrier and ask for an updated illustration and walkthrough of it.
    Answered on May 16, 2017
  3. 22 POINTS
    joe unger
    AG Insurance & Financial Solutions, Huntington, WV
    universal life is a simple stated death benefit policy with possible cash accumulation built in. There 3 components that is subtracted from the premium and 1 that is added. to pay for the state death benefit. Premium - cost of insurance - expense -(possible policy)= excess cash + (fixed % or index value) . by increasing your premium this will increase your excess cash. but be careful as the cost of insurance will increase every year on a universal life policy. so by increasing your premium you may never grow your death benefit but just extend the life of the universal life.
    Answered on May 17, 2017
  4. 5082 POINTS
    J Paul Wilson CFP, CHFCPRO
    Certified Financial Planner, JPW Insurance Retirement Investments, Halifax, Nova Scotia, Canada
    It depends on the design of the policy. Universal Life Policies, issued in Canada, tend to be either a level death benefit or death benefit plus the fund value. If the policy is death benefit + fund and increases the premium then the death benefit would be increased by the fund (cash) value). If the policy is level death benefit the increase in premium will impact the fund value, however, not usually increase the death benefit.
    Answered on October 10, 2017
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