Universal Life Insurance

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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. Accumulation Option

    A policy feature of permanent life insurance that allows policyholders ...
  2. Variable Universal Life Insurance ...

    A form of cash-value life insurance that offers both a death ...
  3. Equity-Indexed Universal Life Insurance

    A permanent life insurance policy that allows policyholders to ...
  4. Bank-Owned Life Insurance - BOLI

    A form of life insurance purchased by banks where the bank is ...
  5. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  6. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
Related Articles
  1. Top 10 Life Insurance Myths
    Insurance

    Top 10 Life Insurance Myths

  2. Indexed Universal Life: Cash, Flexibility ...
    Insurance

    Indexed Universal Life: Cash, Flexibility ...

  3. Cashing In Your Life Insurance Policy
    Options & Futures

    Cashing In Your Life Insurance Policy

  4. 5 Life Insurance Questions You Should ...
    Options & Futures

    5 Life Insurance Questions You Should ...

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center