What is Universal Life Insurance

Universal life insurance (UL) is a type of permanent life insurance that offers both a death benefit and a cash value component. It’s a flexible policy that combines a death benefit with an investment savings element, allowing the policyholder to adjust the premium payments and the death benefit amount over time.

Here’s a breakdown of how it works:

Flexible Premiums: Unlike traditional whole life insurance, universal life policies let you adjust your premium payments. You can pay more when you have the funds and less when you’re on a budget, as long as there’s enough in the cash value to cover the cost of the insurance.
Cash Value: Part of the premiums you pay go toward building a cash value. This cash value grows at a variable interest rate, which is set by the insurer, and can be used for things like loans or withdrawals. It grows tax-deferred, which means you don’t pay taxes on it unless you withdraw or borrow against it.
Adjustable Death Benefit: You can usually increase or decrease the death benefit (subject to underwriting), which gives you more control over your policy as your financial situation changes.
Interest Rates: The cash value in a universal life policy earns interest, but the rate can change depending on market conditions and the insurer's performance. The insurer will usually set a minimum interest rate (e.g., 2-4%), but it could earn more based on the performance of the insurance company's investments.
Costs and Fees: Universal life policies often have higher administrative fees compared to term life or even whole life insurance. These fees can eat into the cash value, so it's important to keep an eye on the policy's performance.

UL insurance is often chosen by people who want permanent life insurance coverage with more flexibility in premium payments and who are willing to accept some investment risk in exchange for the potential to build cash value.

Does that help clarify things? Or are you thinking about whether it might be a good option for you?