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Universal Life Insurance

Universal Life Insurance is a type of Permanent Life Insurance. Death benefit protection will last your entire life, as long as you keep paying your premiums and there are no outstanding loans. Universal Life Insurance (UL) is similar to Whole Life Insurance in that a portion of your monthly premiums goes to the cash value component of your policy.

As the cash value grows, Universal Life Insurance allows you to use the cash value to pay for your monthly premiums. Cash value can also be accessed through policy loans and withdrawals.1

The cash value earns interest. In a Whole Life Insurance policy, this is a fixed rate that is set for the duration of the policy. In a Universal Life Insurance policy, the interest rate is also fixed, but may change at set periods of time, and will never be lower than the guaranteed minimum. This means UL policies can provide the opportunity to earn more interest than a Whole Life Insurance policy, but there may be some years in which it earns less.

Universal Life Insurance policies are typically more flexible than Whole Life Insurance policies.

What is Universal Life Insurance?

As with any kind of life insurance, the purpose of Universal Life (UL) Insurance is to help provide financial protection to your family in the form of a death benefit. 

With a Universal Life insurance policy, you have the ability to adjust the premiums and the benefit amount over the term of the policy. Keep in mind that an adjustment in death benefit could require additional underwriting. The premium amounts and death benefits are fixed with a Whole Life Insurance policy. 

The flexibility of Universal Life offers can be an attractive feature for consumers. For example, when it comes to choosing a death benefit, policies commonly offer two options (although there may be more or less depending on the specific contract): Option A and Option B.

Option A provides the face amount of the policy when the insured dies. The contract can still accumulate cash value, but if the policyholder dies, the beneficiary receives only the death benefit, not the cash value.

Option B provides the beneficiary with the death benefit plus any cash value. Typically premiums are higher if Option B is elected. The election is made when the policy is issued.

One note about Universal Life Insurance — you can decide on a premium amount that fits your financial circumstances. However, your policy may require that additional premium payments be made to keep it in force.

Always check with your licensed life insurance agent before lowering your premium. 

To get started with an estimate of how much life insurance coverage you may need, use our calculator.

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