About Universal Life Insurance

Universal life insurance is a less rigid version of whole life insurance. A universal policy allows the holder to adjust his or her premium payments and death benefit over the life of the policy. The cash value portion of a universal life insurance policy will also reflect any increase or decrease in premiums payments.

Below are points to remember about univeral life:

  • Choose a company that gives fair treatment of old policies relative to the current pricing on newer policies.
  • A universal policy allows the holder to adjust his or her premium payments and death benefit over the life of the policy. The cash value portion of a universal life insurance policy will also reflect any increase or decrease in premiums payments.
  • Monthly premiums must sustain a basic benefit amount and cover the cost of the policy's monthly maintenance by the insurer.
  • Universal life insurance policies are tied to shorter-term interest rates so their rate of return can be significantly higher or lower when interest rates are falling.
  • Increasing the face amount may require an additional medical examination.
  • Universal life insurance allows you to vary the amount of coverage (i.e. future mortgage, college education or children), so you don't have to keep switching policies.
  • Monthly premiums must sustain a basic benefit amount and cover the cost of the policy's monthly maintenance by the insurer.
  • Cash value yields and your premiums will fluctuate with the changing economy and interest rates
  • Universal life insurance earns interest at the current money market rate.
  • Insurers make no minimum guarantees concerning your "cash value" savings on such a policy.
  • If the interest rates drop, it is likely you will have to pay more in premiums to maintain the policy. On average, the cash value of a universal life insurance policy can grow faster and larger than the cash value savings of a whole life insurance policy.