Universal Life Insurance

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Universal life insurance is a permanent life insurance policy that builds cash value. Your premiums go toward both the cash value and the death benefit.  You can change the premium and death benefit amounts without getting a new policy.

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You do have a minimum premium to keep the policy in force.  You can choose to use the cash value to pay that premium. That means if you have enough money in the cash value, you can use that to skip premium payments entirely, letting the accrued interest do the work until the cash value is depleted.

It's a permanent life insurance plan and the cash value of a universal life insurance policy has an interest rate that’s sensitive to current market interest rates. If the interest rate that is being credited to your policy decreases to the minimum rate, your premium would have to increase to offset the reduced cash value.

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This flexibility makes universal life insurance attractive to some people, but it can also be confusing.

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 at more affordable pricing than a whole life insurance 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 needs change and potential return of premium.  

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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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If your needs change as time goes on, you also have the option of decreasing your death benefit without having to buy a new, separate policy. This can be helpful if your budget changes and you need to lower your premiums, or if your financial responsibilities decrease and you no longer need as much coverage.