About Universal Life Insurance

The options offered by life insurance companies may appear overwhelming. There are is term, or temporary, life insurance, and there is also more than one kind of permanent life insurance. One such is universal life insurance. Universal life insurance is similar to whole life insurance in that it lasts for the lifetime of the insured, and in that the policy itself accrues a cash value through the years. However, it has more options than whole life insurance does.

Universal life insurance is designed to not only insure the life of the policy holder, but also provide a kind of investment program. Premiums and benefits both can be adjusted as through the years, instead of remaining static as they do with a whole life policy. Usually the contract will specify both a minimum payment, which is the cost of the insurance itself, and a maximum payment. Anything paid above the minimum will be put into an account which earns interest. That way the policy holder (or whoever is paying the premiums) can choose to put a lot of money into it, or a little.

At any point after the insured reaches adulthood, he or she has the option to collect the cash value of the policy, or else to raise or decrease the benefits. In some cases people chose to pay the minimum amount over the life of the policy, therefore not accruing any value, but having a permanent life insurance policy with fixed rates. If at any point premiums fail to be paid, or if the cash value of the policy becomes insufficient to cover its costs, then the policy may lapse.

The interest rates such policies get is set by the insurer. Sometimes it is tied to an interest rate index of some sort, and will fluctuate with it. Life insurance companies continue to come up with variations on traditional universal life insurance in order to earn and keep customers who are looking for policies with greater flexibility and greater returns to themselves. You should be willing to ask plenty of questions until you are sure that you understand all the details of any policy you are purchasing, and compare prices between companies.