Universal Life Insurance
What is Universal Life Insurance?
Universal life insurance is a type of permanent life insurance, in that the policy can be maintained indefinitely. Universal life insurance provides a flexible way for policy owners to pay their premiums by utilizing the tax-deferred cash value account that accompanies the insurance. This account is invested into the market and the performance may allow for owners to skip premium payments without the possibility of a lapse or it may be used to accumulate savings. Source
Like whole life insurance, universal life insurance accumulates cash value through investment of the premium payments. The unique feature of universal life insurance is that it has variable premiums, benefits, and payment schedules, all of which are tied to market interest rates and the performance of the investment portfolio.
Also, universal life policies normally provide the insured with more consumer information. For example, an insured person is told how much of the policy payment goes for insurance company overhead expenses, reserves, and policy proceed payments, and how much is retained and invested for the insured person’s savings. This information isn’t usually provided with whole life policies. Source
Is Cash-Value or Term Insurance Better for Me?
According to most unbiased experts, term life insurance is more appropriate for the average individual looking to insure him or herself against unforeseen events. However, this does not mean that term life is better for everyone. For example, individuals looking for the tax advantages associated with cash-value plans are not concerned with the prohibitive costs related to those plans, and individuals who start families later in life and need insurance to protect their loved ones may also decide that cash-value insurance is more suitable than term life. Source