Universal life insurance like traditional whole life is a life insurance policy type made for covering one’s entire life time (also known as being permanent).  It also has a cash component just like whole life insurance coverage.  Premiums are flexible (unlike whole life) allowing the policy holder the option to adjust them (though there is a minimum payment that has to be covered).  The death benefit can be increased or decreased if policy requirements are met.  If the policy holder wants to increase their death benefit they can expect to go to the doctor for another medical test.  If they want to decrease their universal life insurance policy’s value there is most likely a surrender fee  involved.

There are two important parts of universal life insurance that anyone should be aware of: cost of insurance charge and the interest credit.  The cost of insurance charge is the what the insurance company is owed for holding the policy which can be expected to go up as the policy holder gets older.  The interest credit is what the policy gets from how well the insurance company’s investments do (often the credit is based on a bond benchmark).   Universal policies may guarantee a minimum interest credit.

A few other notes about universal life insurance to be aware of are the policy’s premiums can be payed with by the cash component of the account and withdrawals are often  an option (with a fee).  This type of policy can have many rules and may give an insurance broker a nice commission so its pertinent to look over the policy thoroughly and ask for a full disclosure of fees.