Universal Life Insurance

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Universal life (UL) insurance is permanent life insurance (lasting the lifetime of the insured) that has an investment savings element and low premiums similar to those of term life insurance.

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What Is Universal Life (UL) Insurance?

Universal life (UL) insurance is permanent life insurance (lasting the lifetime of the insured) that has an investment savings element and low premiums similar to those of term life insurance. Most UL insurance policies contain a flexible-premium option. However, some require a single premium (single lump-sum premium) or fixed premiums (scheduled fixed premiums). A UL insurance option provides more flexibility than whole life insurance. Policyholders can adjust their premiums and death benefits. UL insurance premiums consist of two components: a cost of insurance (COI) amount and a saving component, known as the cash value.

How does Universal Life Insurance work?

Universal life insurance is a type of permanent life insurance. Unlike term life insurance, which is meant for a specific period, such as 20 years, universal life insurance is in effect for the rest of your life (unless you stop making premium payments). Some forms of universal life insurance also offer a cash value component. You can take money out of cash value via a withdrawal or loan. When you die, the insurance company will reduce the death benefit payout to your beneficiaries by the amount of any withdrawals or outstanding loans. But for some buyers, accessing cash value is more important than a full payout to beneficiaries later on. There are a few types of universal life insurance policies and it’s crucial to understand what you’re buying. Their costs and features are quite different.

What are the benefits of Universal Life Insurance?

Withdraw Money or Borrow
Against It

When you pay your premium on a universal life insurance policy, a portion of each payment goes toward paying for the death benefit. Another portion also goes to building up the policy’s cash value. Over time, after money has accumulated, you may be able to withdraw or borrow against the cash value of the policy (the available amount will vary by company)

Earn Interest on Your Policy’s Cash Value

The cash value of a universal life policy generally earns interest that’s in line with current money market rates, says the Insurance Information Institute (III). Of course, it’s important to note that the interest rate will fluctuate along with the market, which means the interest you receive may also go down. But, some companies offer protection against that with a minimum performance guarantee on the policy.

Flexibility With Premiums

If the cash value of your account can cover the costs, you may have the ability to lower or stop paying your premiums on a universal life policy for a certain amount of time, the III says. This can be helpful if money becomes tight and you’re looking for ways to lower monthly bills. But, there can be negative consequences, too, says the III. For instance, your coverage may end if you use up the account’s cash value to pay for premiums.

Adjust the Policy’s Death Benefit

The flexibility of a universal life policy also extends to the death benefit. At some point, you may want to increase the amount that’s paid out upon your death. This is something some insurance companies allow, as long as you pass a medical exam, says the III2,3. Likewise, you might choose to reduce the death benefit, to reduce the cost of the policy. Remember that if you increase the policy’s death benefit, it may increase the premium you pay.

At our Insurance Agency, we understand the importance of retirement planning and helping employees save for the future. That's why we offer comprehensive Universal Life Insurance plan solutions to fit your business and employees' unique needs. Our experienced professionals can work with you to design a plan that offers the right investment options, contribution levels, and administrative support to help your employees reach their retirement goals.

Contact us today to learn more about our Universal Life Insurance plan options and how we can help you and your employees prepare for the future.