What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance based on cash value. This means that the insurance company writes the policy so that the premium payments that are above the cost of the insurance add to the policy’s cash value. The cash value receives interest each month, decided by the insurance company, and the cost of insurance charge subtracts from the policy every month; taken from the cash value every month if there are no premium payments made are any other policy charges or fees.

A benefit of universal life insurance is its flexibility of a greater cash value. It also lets policyholders change the coverage limits, within a previously decided range, as their insurance cover needs change. This flexibility is very attractive to many potential universal life customers, such as small business owners or those with growing families.

Another advantage to this type of policy is its flexible premium payment structure. Policyholders of universal life policies control how often they pay their premiums and how much they pay. They have the option to increase their premiums or make lump sum contributions; the additional dollars grow tax-deferred, increasing the cash and death benefit values.