Universal Life

Universal life insurance is a type of permanent life insurance coverage, offering both a death benefit and a cash value component. The policy will remain in effect for the lifetime of the insured individual, as long as the premiums are paid on time. There are three types of coverage: indexed universal life, variable universal life, and guaranteed universal life.

Policyholders can have flexible premiums or change their death benefit amount, which differs from other types of permanent life insurance policies. Plus, the cash value component offers potential to earn more interest – however, on the flip side, the value can go down over time.

More specifically, the cash value component earns interest based on a money market rate of interest or, for some types of universal policies, a rate that’s tied to a market index. Whatever you earn will increase your investment value, helping you pay your premium. Lowering your monthly payments can be useful if your financial situation changes.

Keep in mind that doing so will eat up your cash value if there isn’t enough, you will need to make up the difference or your policy will lapse.