Step-by-Step Guide to Getting Universal Life Insurance

iQuanti: Many people seeking to purchase a universal life insurance policy are lured in by the ability to build cash value with flexible payments and benefits. Add that to the fact a universal life insurance policy doesn't expire, and it could be worth a look. If you're interested in universal life insurance, here's a step-by-step guide to securing the right policy for your needs.

What is universal life insurance?

Universal life insurance is a type of permanent life insurance policy that's more flexible than whole life insurance. As with a term policy, universal life offers a death benefit payable to beneficiaries if the policyholder dies while the policy is in effect. But like whole life policies, universal life insurance is a lifetime policy that doesn't expire, plus it has the option to accrue cash value. Depending on the type of universal life policy, the cash value component will be slightly different.

Types of universal life insurance

There are three types of universal life insurance policies:

• Guaranteed universal life (GUL): With a GUL policy, policyholders will have an unchanging death benefit and premium. GUL policies tend to be the least expensive type of universal life insurance since the policy often has little or no cash value. But buyers should know that a GUL policy may be terminated with a single late or missed payment. So policyholders need to commit to timely payments for life to avoid losing the premiums they've paid.
• Variable universal life (VUL): With a VUL policy, the policyholder can choose how to invest the policy's cash value, which may be a fixed-rate investment or investing funds in the stock market. Keep in mind that a VUL policy is often complex and comes with high fees, so you should do thorough research before getting this kind of life insurance. Also keep in mind that this policy generally contains risk of loss of cash value and you should talk to an appropriately licensed financial advisor before purchasing a variable policy. 
• Indexed universal life (IUL): As the name implies, the cash value invested in an IUL policy may be tied to a stock market index, like the S&P 500. Typically, gains may be a fraction of what you could get by putting money directly into the stock market. That's thanks to participation rates and caps. Like a VUL policy, IUL policies tend to be complex, meaning it's a good idea to compare options and do sufficient research to find the right policy for your needs.

How to get a universal life insurance policy

The steps to get a universal life insurance policy are relatively straightforward:

1. Research insurance companies

The first step in finding the right universal life insurance policy is to research reputable insurers. There are many options to choose from when it comes to life insurance companies. But you can spot the good ones by looking at customer reviews, transparency with policy details, and long-term financial stability.

2. Review policy options

Once you've found some reputable insurers, you can look into the types of policies they offer. Of the three options outlined above, you may find that a particular life insurance policy is more aligned with your financial goals.

3. Get a quote

Many insurance companies require you to contact them directly to get a quote for universal life coverage. That's because the underwriting process for permanent life insurance is a bit more complicated than term life, which many companies can quote using an online tool.

4. Submit an application

If you're happy with the quote and policy terms, the next step is to submit your formal application.

5. Go through the review process

Some insurance companies may reach out with additional questions or arrange for you to have a health assessment in a convenient location like your home or workplace, at no cost to you. Completing this process can get you one step closer to approval.

6. Receive and review the final policy details

If the insurer decides to move forward with issuing a universal life policy, you'll receive the paperwork in physical or digital form. Make sure you review the fine print and reach out to the insurer with any questions or concerns about what's included in the policy.

7. Sign and begin paying premiums

Once you're happy with the policy pricing and details, it's time to sign on the dotted line. Then, after the policy is in place, you'll begin to start paying monthly or yearly premiums in line with the agreed-upon terms.

The bottom line

Universal life insurance policies tend to be some of the more complex life insurance policies available. And that means anyone looking at this option should take time to thoroughly review insurers and policy options. In most cases, working alongside a financial professional is the best option before signing on for a policy that may be difficult to understand on your own.