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The amount of coverage can also be easily increased or decreased. Plus, you can change the policy from a level benefit type to the cash value plus a specified death benefit. If you choose to increase the coverage, you will generally be asked to prove insurabil- ity again. But you won’t need to do anything if you are decreasing the amount of coverage.

This flexibility makes a universal life policy very attractive. The policy can change with you as your needs change. For example, when you get older and aren’t in need of as much insurance protec- tion, you can decrease your coverage. Or, if you don’t want to pay your premium and want to use it for something else, you don’t have to worry about your policy lapsing because the cost of insurance will come from the investment account.

However, the flexibility of the premium payments is also a draw- back. If you were to economize on your premiums early on in the life of the policy, you may find that in the later years of the policy, you will be subject to larger-than-anticipated premiums. Plus, if the inter- est rate declines, the investment account may not grow fast enough to cover the cost of insurance. Also, just because there is flexibility with the payment of premiums, that doesn’t mean that at some point the premiums would disappear. Usually, the premiums never disappear. Even if they did, they would probably reappear once the interest rates declined to the point where they wouldn’t cover the cost.

Check to see what the guaranteed interest rate is before you pur- chase your policy. Typically, policies will state that they pay current interest on policies. This could be five or six percent, as compared with the guaranteed minimum of, say, three percent. It’s important that you know what the policy’s interest rate is tied to. Many times, the interest rate for policies is that of the 90-day Treasury bill.


While universal life offers a separate investment account that earns a competitive interest rate, variable life takes this concept one step fur- ther by allowing the policyholders to choose how they want their dol- lars invested in the cash value account. Variable insurance gives the insured the possibility of higher returns than would otherwise be

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