Universal Life Insurance

Older couple looking at computer to get the best universal life insurance for seniors

There are two broad categories of life insurance that are available for permanent 
coverage. They are known as whole life and universal life insurance policies.

Today, universal life insurance for seniors with guaranteed premiums and face amounts comprise the majority of permanent coverage. These policies are consumer friendly because they make it easy to understand and compare cost from one carrier to another. This is a major advantage in most cases because it’s easy to compare prices when all premiums are guaranteed to be level for as long as the insured lives.  

Most major insurance companies offer universal life insurance coverage. Although some policies may generate nominal amounts of cash value, their primary benefit is the guaranteed nature of the premium and face amount, also known as the death benefit.

Underwriting categories for permanent coverage can be more advantageous for the insured as well, with some insurance companies offering special rates based on age and particular health issues. 

Universal Life Insurance Facts

Man in a suit giving thumbs up to show universal life insurance pros for seniors
  • A universal life insurance policy will last a lifetime (as long as you pay the premiums)
  • These policies can be structured so that your premium and face amount remain the same for the life of the policy. You can guarantee the premium and face amount for a specific period, such as up to age 105 (other ages are also available).
  • Some companies offer people with certain health issues a better underwriting rating through different programs only available with universal life insurance. This is called table shaving.
  • Can be structured to accumulate no cash value to keep the premiums lower. There is no reason for cash accumulation because if you borrow money out of the policy you can affect the guarantees. When you pass, your beneficiary gets the face amount and the insurance company keeps the cash value.
  • Universal life policies are a good way to provide heirs for cash to assist with estate taxes. A survivorship, or second to die policy will usually cost less than two individual policies. Additionally, if one person is uninsurable, you still may be able to get survivorship coverage.
Thumbs down to show universal life insurance cons for seniors
  • Universal life policies are generally more expensive than term life, but will last your lifetime. (At age 70 and older you may find the cost is comparable or even less expensive than a 20 year term policy. If you are a candidate for table shaving (see pros) you may find your premium is even less.
  • A permanent policy may not be suitable for your needs. If you are a young couple with a family, you may be better off buying term insurance where you can get much more term coverage while their children and your estate is growing.
  • There aren't many "cons" here because if a permanent policy is right for you, then guaranteed premium universal life insurance is most likely your least expensive option.
Woman behind wheelchair outside to think about chronic and critical care riders for seniors

In additions to premiums there are several other points that should be considered by the consumer but are generally unknown to most buyers.  I am speaking of several new riders that are available on some policies today, and most likely will become more the norm as time goes on.

For example, several universal life carriers offer an enhanced chronic illness benefit rider that can allow the insured to obtain a maximum of 2% of the face value of their policy on a monthly basis.  This rider can be accessed under certain conditions including a statement by a licensed healthcare provider that the impairment has occurred in the last year and must be re-certified annually.  What’s more, the qualifications for this benefit are similar to or exactly the same at those qualifications that allow access to funds for those who own Long Term Care policies.   

While this rider does not offer many of the benefits of an LTC policy such as inflation riders and less stringent underwriting requirements, the cost of the universal policy with a substantial death benefit will in many cases, can be significantly less.

Gold dollar sign to show that a 1035 exchange can save you money

If you have a whole-life policy that has accumulated a cash-value reserve, you should strongly consider taking advantage of a 1035 

What many consumers don't realize is that the cash accumulation within permanent policies isn't added to the death benefit upon the insured's death. Instead, the insurance carrier uses the cash reserve to help pay the death benefit. In fact, if you have taken out a loan against the reserve, the carrier will reduce the death benefit by the unpaid balance on the loan.

But the cash reserve can be put to great use—by you and not the carrier—with a 1035 exchange.

Essentially what happens is that you transfer the cash reserve to a new permanent policy and use it to “pay down” the cost of the new policy—thereby allowing you to lower your rate or get more death benefit for the same rate. And thanks to the 1035 IRS provision, you can use the cash reserve for the new policy without any tax ramifications!

One of the best choices of permanent policies for this purpose is a guaranteed premium universal life policy, in which the death benefit and the premium never change—a critical guarantee if you need the coverage for the rest of your life.

IRS Requirements Are Simple

To do a 1035 transfer, the IRS stipulates that:

  • The new policy must be of least as much face value as the existing policy.
  • There must be a direct business-to-business transfer (insurance carrier to insurance carrier). In other words, you can’t ever come into possession of the cash yourself.
  • The owner(s) of the policies must be the same.
  • The insured(s) of the policies must be the same.

1035 Makes Sense in Many Cases

Beyond the use of cash-value accumulation, there are other reasons why a 1035 exchange can pay off for you, such as:

  • Improved health, allowing you to qualify for better rates.
  • Poorer health that requires you to use a 1035 transfer to be able to afford coverage.
  • Simply finding a carrier with better rates.
  • Consolidation of two or more policies, which can be combined into one policy using a 1035 exchange as long as they are the same type of policies and meet the other IRS requirements.

Consult with an experienced independent life insurance agent to discover how you can best use a 1035 exchange to your financial benefit.exchange.

LifeNet Insurance Solutions Can Help


Universal life insurance is going to be the least expensive permanent policy you can buy. You need to have a paramedical exam, including blood and urine testing. If you are willing to do so, you will generally find this policy will be your best value. 

Get a free quote for universal life insurance here. Then give us a call and we will let you know if we can find you a better value.

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