Universal Life Insurance

Loading the player...

What is 'Universal Life Insurance'

A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder's circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.

BREAKING DOWN 'Universal Life Insurance'

Universal life insurance was created to provide more flexibility than whole life insurance by allowing the policy owner to shift money between the insurance and savings components of the policy. Premiums, which are variable, are broken down by the insurance company into insurance and savings, allowing the policy owner to make adjustments based on their individual circumstances. For example, if the savings portion is earning a low return, it can be used instead of external funds to pay the premiums. Unlike whole life insurance, universal life allows the cash value of investments to grow at a variable rate that is adjusted monthly.

RELATED TERMS
  1. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  2. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  3. Cash-Value Life Insurance

    A type of life insurance policy that pays out upon the policyholder's ...
  4. Voluntary Life Insurance

    A financial protection plan that provides a beneficiary with ...
  5. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  6. Equity-Indexed Universal Life Insurance

    A permanent life insurance policy that allows policyholders to ...
Related Articles
  1. Personal Finance

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
  2. Financial Advisor

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  3. Personal Finance

    What's Universal Life Insurance?

    Universal life insurance is permanent life insurance that offers a savings element.
  4. Personal Finance

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  5. Personal Finance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  6. Personal Finance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  7. Financial Advisor

    Which Life Insurance is Right For You?

    Consumers have choices when it comes to life insurance. Knowing your future needs for cash or retirement can make the difference in what you select.
  8. Personal Finance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  9. Trading

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  10. Personal Finance

    Permanent Life Policies: Whole Versus Universal

    Permanent life insurance combines lifetime insurance with savings to provide lifelong security. Premiums are quite high because they’re partially invested.
RELATED FAQS
  1. What is indexed universal life insurance?

  2. Can I convert my universal life policy to a whole life policy?

    It seems like my universal policy keeps going up each year in premiums. ... Read Answer >>
  3. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  4. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
Trading Center