Can You Lose Money With Universal Life Insurance?

Are you worried about losing your money if you stop making payments on a universal life insurance policy? With some types of policies, this can be a valid concern. This concern is not just valid for people who by universal life, though, but with other types of life policies as well.

Some Basics Of Universal Life Policies

First take a moment to understand a little bit about how this type of policy works. It is a permanent form of coverage, like whole life, that guarantees to cover you as long as it is kept in force. This makes it different than term life which expires after a certain amount of time passes.

It is a bit different than whole life though.

For one things, you have more flexibility in your payment amounts.

You will have a low payment that will keep your coverage in force. This is the minimum payment.
You will have a high payment that you cannot go over to satisfy certain regulations. This is the maximum payment you may make.
And finally, you will have a “target” payment. This amount is between the low and high payments, and it is sufficient to help you meet certain financial goals you had illustrated when you purchased your policy.

Note that I mentioned you needed to make a “minimum” payment in order to keep your coverage in force. If you stop making payments, and there is not enough cash to keep the policy in force, it can lapse. In this case, you can lose your money. If there is a large enough balance in the cash account, it could sustain the policy for a long time. If not, your policy could lapse rather quickly.
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