What is universal life insurance

Universal life insurance is a type of permanent insurance with flexible offers that includes investment savings elements and low premiums. With Universal insurance, individuals are able to reduce or increase their death benefit and pay their premiums at any time in any amount once there is money in the account. However, this amount is subject to certain limits.

Essentially, when you make a payment to your plan, a portion will go to the death benefit while the other portion will go into an investment account. What’s even better is that any interest accrued since your first deposit will be credited to the account.

The cash value is guaranteed to grow in correlation with the minimum annual interest rate. With that said, this value has the potential to grow faster but will depend on the insurer’s market performance.

Difference Between Universal and Whole Life Insurance

Many people confuse Universal and Whole life insurance. While both are permanent life insurance, there are few key differences that help to distinguish the two.

• Universal life insurance offers a variety of different payment options. Whole life insurance offers fixed level premiums.
• With Universal life insurance, you might be able to skip premium payments if the cash value is enough to cover expenses for that month.
• Premiums with Universal insurance are generally lower during periods of high-interest rates.
• Interest is adjusted monthly with Universal insurance while adjusted annually with Whole insurance.

For a practical, step-by-step walkthrough on choosing the right policy, see our Life Insurance Buyer’s Guide.

Advantages of Universal Life Insurance

Increase of Cash Value
One of the greatest benefits of a Universal life insurance premium is the ability to increase cash value. Universal life doesn’t pay dividends; however, policyholders can expect cash value growth, loan collateral, and premium payment benefits.

Universal life policies can calculate growth in three ways:

• Surrender Value: Return the policy to the insurer for cash value if you no longer want it.
• Loan Collateral: Borrow money using the cash value as collateral; interest rates apply.
• Premium Payments: Use the cash value to pay premiums; policies can lapse if cash value reaches zero.

Premium Flexibility

Individuals can increase or decrease death benefits as long as sufficient money is in the policy. Withdrawals reduce cash value, so monitoring your balance is important. Premiums can be increased, decreased, or skipped depending on the account balance, and death benefits can be adjusted within policy limits.

Death Benefit Protection

Universal life insurance provides a death benefit payout to beneficiaries, giving peace of mind that your loved ones are financially protected as long as sufficient premiums are paid.

Guaranteed Interest Rates

Cash value grows over time with guaranteed interest rates. More cash value means greater financial security for you and your loved ones.

Tax Advantages: Death benefits are tax-free, and policy loans are penalty-free. Note that lapsing policies or surrendering with an outstanding loan may create taxable amounts.

Things to Consider: Who is Universal Life Insurance Right For?

Universal life insurance is ideal for individuals with specific needs, high net worth, special expenses, or those seeking flexibility in premium payments and death benefits. It allows for tax-deferred savings, cash value growth, and policy adjustments to meet changing financial circumstances.

For seniors, see our Medicare Guide. For long-term planning, use our Retirement Planning Checklist and Retirement Calculator to estimate policy and savings impact.

This life insurance guide was created by Amerus Insurance Group, helping families protect what matters most with affordable coverage designed for every stage of life. From term life and whole life to final expense solutions, our agents shop the top carriers to find the best value for your needs. Request your personalized life insurance quote today.