Universal Life (UL)

Universal Life is a type of permanent life insurance based on a cash value. Premium payments above the cost of insurance are credited to the cash value. The cash value is credited each month, with interest, and the policy is debited each month by a cost of insurance (COI) charge, which is drawn from the cash value if no premium payment is made that month. The interest credited to the account is determined by the insurer; and is often tied to a financial index. Because only the amount of interest credited varies—not the cash value itself—UL policies offer a stable investment option.

Universal Life is similar to Whole Life insurance. The potential advantage of a UL policy is flexibility and greater potential for cash-value growth if interest rates perform well. Universal Life is more flexible than Whole Life in two primary ways:

1. The death benefit and, typically the premium payment, are flexible.


2. The death benefit can be increased (subject to insurability) and decreased without surrendering the policy or obtaining a new one, as would be required with Whole Life.