The difference between Universal & EIUL Life Insurance? Which one is better and why?

Question

The difference between Universal & EIUL Life Insurance? Which one is better and why?

Answer 1

Universal life insurance is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed minimum but usually is higher than that minimum. Mortality charges and administrative costs are charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any.

Universal life policies guarantee, to some extent, the death proceeds, but not the cash function - thus the flexible premiums and interest returns. If interest rates are high, then the dividends help reduce premiums. If interest rates are low, then the customer would have to pay additional premiums in order to keep the policy in force. When interest rates are above the minimum required, then the customer has the flexibility to pay less as investment returns cover the remainder to keep the policy in force.

The universal life policy addresses the perceived disadvantages of whole life. Premiums are flexible. The internal rate of return is usually higher because it moves with the financial markets. Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it.

Universal life has its own disadvantages which stem primarily from this flexibility. The policy lacks the fundamental guarantee that the policy will be in force unless sufficient premiums have been paid and cash values are not guaranteed.

Answer 2

EI stands for Equity Indexed and relates to returns on certain market indices.  I'm not a fan and an E.I. product (whether life or annuity) as it is mostly sold by people with no security license.  I've been in the business for 15+ years and have never bought nor sold one.  

The "regular" UL will cost less over time, but if you're in a lower tax bracket and don't make too much to contribute to a Roth IRA then you should consider term or Return of Premium term.

Given the choice for the answer the Universal Life is likely better due to lower cost.

Jeff

Answer 3

What are you trying to do?

I've got a miter saw that works really well for fine edges and angles, but sometimes I have to clean up the work with my coping saw.  But lately the hole saw has been getting more use around my house because cutting a 1" square in drywall is just plain awkward any other way.

Answer 4

Universal life uses a current interest rate to increase cash value.  Currently about 5-6%.  EIUL is equity indexed UL or more commonly just indexed UL and it is based on a rate tied to the S & P and over the past 10 years has averaged a rate of about 8-9%.  Which is better and why is a personal decision for the client to make.  Risk tolerance and reviews with a financial planner will help answer those questions.

Answer 5

They both invest the remaining fund value in your life insurance product after the company deducts mortality and administrative charges.  

Universal life pays a return on your fund value based on the performance of the general portfolio of the insurance company.  It's mostly invested in different types of bonds and earns 5 or 6%.  UL usually has a minimum guaranteed return of 3 or 4%.  

Equity Indexed UL usually pays a return based on a stock market index like the S&P 500.  Usually your return has a minimum of 0-2% and in order to pay for those guarantees you usually only get a certain percentage of the gain in the index.  For example if the S&P goes up 20% your fund may only go up 15%.  If the S&P goes down 20% your fund will still grow by 2%.  The product was created for people who wanted the higher gains that the stock market provides without the added risk of a full variable universal life product.  

With a variable UL product your returns are tied to specific mutual funds that you choose from what the company offers.

I wouldn't say any of these is better or worse for everyone.  That will totally depend on your risk tolerance.  Just watch the fees as they vary from company to company and try to get the best version of which ever product you decide is best for you.