What is Universal Life Insurance?
Universal life insurance provides more flexibility than whole life insurance. Where whole life insurance has a fixed rate premium linked to an investment component, with universal life insurance, you have the option to pay premiums above the minimum required cost of insurance, in order to create a cash value that can be used in the future. In other words, universal life insurance offers you low-cost protection combined with a savings element.
The cost of the insurance coverage keeps the policy in force, while any premiums paid over the minimum cost of insurance, will accumulate. You can draw these savings out at a later date, and use them to continue to pay the monthly premiums if you wish. Your universal life insurance policy is guaranteed, just as long as the minimum cost of insurance is covered – but this can be either through the monthly payment of premiums, or from the cash value of the savings.