Universal Life Insurance

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Universal life insurance is a type of permanent life insurance coverage, offering both a death benefit and a cash value component. The policy will remain in effect for the lifetime of the insured individual, as long as the premiums are paid on time. 

Policyholders can have flexible premiums or change their death benefit amount, which differs from other types of permanent life insurance policies. Plus, the cash value component offers potential to earn more interest – however, the value can go down over time.

More specifically, the cash value component earns interest based on a money market rate of interest or, for some types of universal policies, a rate that’s tied to a market index. Whatever you earn will increase your investment value, helping you pay your premium. Lowering your monthly payments can be useful if your financial situation changes.

Keep in mind that doing so will eat up your cash value – if there isn’t enough, you will need to make up the difference or your policy will lapse.

A guaranteed universal life (GUL) could be looked at as a combination of term life insurance and whole life insurance. A GUL can provide lifetime coverage that is more affordable than a final expense policy. This product may be ideal for individuals who want lifelong death benefit protection but don’t need the cash value.  Policies have guaranteed death benefit amounts with an option to decrease your death benefit if your needs change.   

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As long as you pay your planned premiums to keep your policy active, your beneficiaries will receive the guaranteed death benefit when you die.

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This allows a larger policy face amount at a lower price.