Universal Life Insurance
Universal life insurance is a type of permanent life insurance, which means it offers lengthy coverage and builds cash value over time. Policies typically last until a certain age, such as 95 or 120. This coverage offers flexibility that other permanent policies — like whole life insurance — don’t. For example, you can adjust the amount you pay in premiums, which may appeal to those with fluctuating incomes.
The best parts about universal life insurance are its flexibility in premium payments and the ability to accumulate a cash value that grows tax-deferred, which can be accessed for loans or withdrawals. Additionally, it provides lifelong coverage with an adjustable death benefit, offering both insurance protection and a savings component.
Advantages of Universal Life
Flexible premiums
Universal policies allow you to change the size and frequency of your payments, which can be handy when times are lean. However, paying less can put you at risk of a policy lapse, so check with a fee-based life insurance advisor before making significant changes to your premium payments.
Flexible death benefit
Your policy may include the option to increase the death benefit if you need more, although you’ll likely need to take a life insurance medical exam to qualify for the extra coverage. If you want to decrease your death benefit, you can typically do so after the policy has been in force for a few years.
Cash value growth
The money in your cash value account will earn interest at the rate set by your insurer, and that rate can change frequently.
Lower premiums than Whole Life
Universal Life insurance typically has a lower premium than Whole Life Insurance for the same death benefit. This is because universal life insurance offers more flexibility in premium payments and death benefits, which can be adjusted over time to suit the policyholder's needs. In contrast, Whole Life Insurance provides fixed premiums and a guaranteed death benefit, along with guaranteed cash value accumulation, which generally results in higher premiums.