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| What Is Universal Life? |
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Universal life is a policy that includes an investment program and a term
insurance contract. For income tax purposes, it enjoys the tax advantages
of life insurance. It differs from other forms of insurance because once
the initial premium is paid in the amount necessary to pay the costs of
establishing the policy, paying the term insurance rate, and setting up
a cash value account, annual fixed premiums are no longer required. The
policyholder may invest selected amounts when he or she wishes into the
cash value account within certain tax restrictions to avoid becoming a
modified endowment contract. The annual term insurance cost is taken out
of the cash value account. The death benefit will amount to the term
insurance in force plus the cash value account and will be received tax
free by the beneficiary.
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