A Guide To Universal Life Insurance

Shawn Plummer

CEO, The Annuity Expert

Since 2009, we have been delving deep into the world of insurance to empower you with knowledge that aligns with your needs and financial situation. Today, we’re unpacking the definition of universal life insurance, illuminating how it works and why you might choose universal life insurance to ensure a secure future.

What is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance policy offering flexible premiums, a flexible death benefit, and a cash value component. This means it not only provides lifelong coverage and death benefits to your beneficiaries but also allows you to accumulate cash value over time. It is a blend of the benefits you get from term life and whole life insurance policies, aiming to offer you the best of both worlds.

What Is Universal Life Insurance

How Does Universal Life Insurance Work?

When you pay your monthly premiums, part of that money goes toward the insurance cost, and the rest goes into the cash value account, allowing you to build cash. This cash value portion grows based on a guaranteed minimum interest rate set by the insurance company. Sometimes, this interest rate may be tied to a market index, as is the case with indexed universal life insurance. The accumulated cash value can also be invested in mutual funds, offering a chance for higher growth, as seen in variable universal life insurance policies.

The flexible premiums feature means you can adjust your premium payments within certain limits, depending on your financial situation. You can also change the death benefit amount according to your needs, offering a level death benefit or an increasing death benefit.

Why Choose Universal Life Insurance?

  • Lifelong Coverage: Unlike term life insurance, universal life insurance offers permanent coverage, ensuring your beneficiaries are taken care of for your entire life.
  • Cash Value Growth: You have the opportunity to accumulate cash value over time, which can be withdrawn or borrowed against, providing financial support when needed.
  • Flexibility: With the ability to adjust premium payments and death benefits, this policy adapts to your evolving financial needs and goals.

Cash Value Component & Its Benefits

The cash value component is like having a savings account within your insurance policy. The cash value account grows tax-deferred, meaning you won’t face tax implications for the cash value growth. You can withdraw money from this account or take policy loans, depending on your needs.

This accumulated cash value can be pivotal in addressing various needs like:

  • Funding a college education
  • Complementing retirement income
  • Covering unexpected expenses

However, it is essential to maintain enough cash value in your policy to keep it active. Also, withdrawals and loans may have tax consequences and impact the policy’s death benefit and cash value.

Universal Life Insurance Quote Calculator

Before purchasing a universal life insurance policy, use a calculator to estimate the cost and benefits of different coverage options. Our insurance calculator considers several factors, such as your age, health status, and desired death benefit amount, to estimate the premiums you can expect to pay and the value of your policy over time. Additionally, many calculators offer a side-by-side comparison of different life insurance policies, including UL, whole Life, and term life. Comparing rates can help you better understand the pros and cons of each option and make an informed decision about which policy is right for you.

Types of Universal Life Insurance

  • Guaranteed Universal Life Insurance: Offers a guaranteed death benefit with a focus on lifelong coverage, often with a lower cash value growth potential.
  • Indexed Universal Life Insurance: Ties the cash value component to a market index, allowing for a potentially higher return.
  • Variable Universal Life Insurance: Provides various investment options for the cash value portion, resembling mutual funds, for those seeking higher rewards and assuming higher risk.

How to Choose the Right Universal Life Policy?

Understanding your needs, financial situation, and life goals is crucial when considering universal life insurance options. Consulting with a knowledgeable insurance agent is invaluable in navigating the myriad of life insurance companies and policies available. They can help you weigh the benefits, costs, and structure of universal life insurance policies against your unique circumstances, ensuring you choose the one that aligns best with your aspirations and needs.

How Does Universal Life Insurance Work

Next Steps

  • Reach out to a reputable insurance company or an experienced insurance agent to discuss your needs and get quotes.
  • Evaluate the insurance company’s claims-paying ability and the guaranteed minimum interest rate offered.
  • Consider your long-term goals, the desired death benefit amount, and your ability to pay premiums.
  • Think about the financial impact, including tax implications, of policy loans and withdrawals.

By arming yourself with knowledge and aligning your choice with your needs and goals, you can leverage universal life insurance as a versatile financial instrument, securing peace of mind and a stable future for yourself and your loved ones.


Universal life insurance is a multifaceted financial tool, providing not just a death benefit but also the chance to accumulate cash, offering a safety net for unforeseen events. Whether your focus is lifelong coverage, flexible premiums, or cash value growth, understanding the nuances of a universal life policy is crucial. So, when exploring universal life insurance, remember to consider your long-term objectives, the guaranteed death benefit, the accumulated cash value, and, most importantly, the enduring peace of mind that comes with knowing your loved ones are protected.

Many insurance companies offer universal life insurance policies and typically provide quotes through independent brokers. Popular options include John Hancock, Prudential, Nationwide, North American, and Allianz. Click below to start your search for a universal life insurance quote.

Universal Life Insurance Quotes

Feel free to contact us for a universal life quote. The service is free of charge.

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Frequently Asked Questions

Who offers the best universal life insurance?

John Hancock, Nationwide, and Prudential offer the best UL insurance because of their higher maximum coverage levels, low premiums, and A+ (Superior) rating from A.M. Best.

Is universal life insurance a sound investment strategy?

Universal life insurance can be a good investment strategy for individuals looking to grow their cash value over time and access those funds when needed.

Which riders will pay a death benefit?

Riders that will pay a death benefit include the accelerated death benefit rider, the child rider, and the spousal rider. These riders are designed to provide financial protection for the policyholder’s beneficiaries in the event of the policyholder’s death.

Can a universal life insurance policy be sold?

Yes, a universal policy can be sold. The policies are typically sold through financial advisors or life insurance agents.

Can a universal life policy be paid up?

Yes, a UL policy can be paid up. This means that the policyholder can make one final lump sum payment to cover their ongoing premiums fully and ensure that the policy remains in force for its full term.

What happens if I miss a payment?

If you miss a payment on your policy, there may be several consequences, depending on your policy’s specific terms and conditions. For example, some policies may allow you to make a one-time “grace period” payment to reinstate your coverage after missing a payment. However, this will typically come with additional costs or fees.

Is universal life insurance cheaper than whole life?

There is no one-size-fits-all answer to this question, as the cost of life insurance depends on many factors, including the death benefit amount, the policy term, and the age and health of the insured individual. However, universal life insurance tends to be more flexible and less expensive than whole life insurance.

What happens to cash value in universal life policy at death?

The cash value and the investment gains stay with the insurance company, and the beneficiaries inherit the death benefit tax-free.

What happens when a universal life policy matures?

When a policy matures, the policyholder will typically have the option to continue their coverage or cancel it. However, if the policy continues, the premiums will generally increase yearly as the insured individual ages.

Can you cash out a universal life insurance policy?

It is possible to cash out a universal life insurance policy, but this will typically come with several fees and surrender charges.

Related Reading

  • What type of policy would offer the quickest accumulation of cash value?

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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