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What Is Universal Life Insurance

  • admin
  • January 5, 2016 5:24 PM


Universal life insurance is an option for permanent coverage that gives the insured lots of flexibility in terms of both coverage (death benefit) and cost (premium). Universal life insurance is a good option for policyholders who want to be able to take advantage of what the market has to offer – without losing out on the security of a life insurance policy.

How Does Universal Life Insurance Work?

Universal life insurance is a much less rigid form of whole life insurance. This type of policy allows the policyholder to adjust the death benefit and premium payments throughout the lifetime of the policy.

What’s more, universal life insurance policies accumulate cash value, although it’s important to note that the final cash value from a universal policy will vary depending on whether you:

  • Borrow money from the policy
  • Stop making your premium payments, in which case the cash value accumulated in your policy will continue to cover the premium payments until exhausted.  Once this occurs, you will need to maintain your premium payments or the policy will default and end up being canceled.

Universal life insurance has a shorter-term interest rate than a whole life insurance policy, which means that the return rate could potentially be a great deal higher. This also means, however, that there is more risk involved if interest rates start to fall.

Universal life insurance policies are great for policyholder’s who have financial needs that fluctuate over time since they can easily be adjusted to fit in with current circumstances – without running the risk of losing out on coverage.

What Are the Advantages and Disadvantages?

Experts will tell you that one of the most important things to consider when choosing a universal life insurance policy is your timing. Universal life insurance will earn interest at whatever the current money market rate is and it’s important to remember that an insurer isn’t going to make any minimum guarantees when it comes to your policy, nor the “cash value” in it. Your premiums and cash value yields will fluctuate with market interest rates, as well as changes in the economy.  This is the complete opposite of whole life insurance, where a baseline minimum is guaranteed.

On the flip side, however, one of the biggest advantages of a universal life insurance policy is that the cash value has the potential to grow faster – and greater – than with a standard, whole life insurance policy.

When deciding whether a universal life insurance policy is for you, it’s important to weigh your options carefully, paying particular attention to the risks and then comparing them to the rewards.

Should You Purchase a Universal Life Insurance Policy?

If you’re looking for flexibility without having to constantly change policies, universal life insurance is a great option for you. If you’re happy to pay a regular monthly premium and then just leave the rest up to the life insurance company, you may want to think about selecting a whole life insurance policy instead. For someone who wants to be more in control when it comes to policy details, however, you’ll benefit the most by selecting a variable life insurance policy.

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