?? Understanding the Face Amount in a Universal Life (UL) Insurance Policy ??

When purchasing a Universal Life (UL) insurance policy, one of the most important decisions you'll make is selecting the face amount the death benefit your beneficiaries will receive. This amount is chosen at the time of purchase, but as life changes, your insurance needs may change too. The good news? With a UL policy, you can adjust the face amount, either increasing or decreasing coverage, without the need for a new policy.

?? Increasing Your Coverage If life brings unexpected changes, such as new family members or significant financial responsibilities, you may find yourself needing more coverage. For example, Richard initially purchased a $500,000 UL policy to ensure his wife Maria and their two children would be financially secure if something were to happen to him. However, when Richard and Maria unexpectedly learned they were expecting twins, he knew his family’s financial needs would be greater in the future. Instead of purchasing a brand new policy, Richard simply increased his coverage to $1,000,000 under the same policy after providing proof of insurability (meeting the insurance company’s health standards). This flexibility can be incredibly valuable as it allows you to adjust your coverage based on life’s new milestones.

However, it’s important to note that when you increase the face amount, the insurer will likely require proof of insurability, unless you have a guaranteed insurability rider. Without this, you’ll need to meet the company’s requirements to prove you're still in good health.

?? Decreasing Your Coverage On the other hand, as your financial responsibilities decrease perhaps after paying off a mortgage or as your children become financially independent you may choose to reduce your coverage. Decreasing the face amount typically lowers the mortality costs (the cost of insurance), which in turn can help your policy’s cash value grow faster, as more funds are available for investment.

For both increases and decreases, insurance companies often set minimum thresholds. For example, they may require increases of at least $25,000 or decreases of at least $10,000, to minimize administrative costs.

?? How Face Amount Impacts Your Policy’s Cash Value One key thing to keep in mind is that the face amount isn’t just about how much your beneficiaries will receive it also impacts your policy’s cash value. The higher the face amount, the higher the insurance company's mortality costs. This means they’ll take more from your policy’s investment account, which could slow down the growth of the cash value unless you increase your premiums to compensate. On the flip side, reducing the face amount decreases those costs, leaving more money to grow in the investment account, which can lead to a higher cash value.

?? In Summary Universal Life insurance provides the flexibility to adjust your coverage to fit your life as it changes. Whether you’re welcoming new family members, paying off debts, or entering a new phase of life, you have the ability to increase or decrease your coverage accordingly. But remember, changes in your face amount can affect your policy’s cash value and premiums, so it's important to consider how these adjustments fit into your overall financial plan.

?? Are your life insurance needs changing? Let’s discuss how you can ensure your coverage grows and evolves with you. Reach out today to explore your options!