What is Straight Universal Life Insurance?

Straight, or basic universal life insurance is permanent life insurance coverage with a savings element that earns a market based rate of return and flexible premiums. 

Uses of Straight Universal Life Insurance?

People who buy straight universal life insurance want long-term death benefit protection coupled with the ability to make flexible premium payments in order to maximize the cash value of the policy.

Uses of straight universal life insurance include:

    • Provide death benefit protection to a family or business.
    • Create a tax advantaged fixed return asset that allows the policy owner to manages interest rate risk because of the contracts no loss provision.
    • Hold an asset that has the ability to “self-fund” without additional premium contributions if the policy owner becomes disabled.
    • Create a tax advantaged source of income in retirement while leveraging the death benefit for other goals such as Social Security retirement delayed income credits.
    • As business insurance it allows the company to provide various benefits to key employees and protect the business from losing those key employees services.

How does straight universal life insurance work?

When a policy owner pays the premium for an straight universal life insurance policy, part of the premium is allocated to pay for the cost of the term life insurance in the policy and the rest goes into the general account of the insurance company who invests the proceeds to earn interest for the policy owner.

If the policy owner does not pay the premium then the cost of insurance to provide the death benefit is deducted from the cash value. As long as the cash value exceed the amount of premium due, either from earnings or additional payments, the policy stays active.

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