What is Universal Life Insurance?
Universal Life Insurance is a type of life insurance that lasts your whole life—not just for a set number of years. It also has a built-in savings account that can grow money over time. This means it gives you two things: protection for your loved ones if you pass away, and a way to save money while you’re still living.
Opportunity Is the First Step to Greatness
One of the best things about universal life insurance is that it’s flexible. You don’t have to pay the same amount every month. You can choose to pay more or less, as long as there’s enough money in the policy to keep it going. Part of your payment goes to the cost of the life insurance, and the rest goes into a cash value account—which is like a savings account inside your policy. This account earns interest, so it can grow over time.
You can use the money in your cash value account while you’re still alive. For example, you might borrow from it or take some money out to help with big expenses, like a home repair or a medical bill. Just keep in mind that if you take money out and don’t pay it back, your family may get less money when you pass away.
Another good thing is that you can change the amount of coverage if your needs change. Maybe you need more protection when you have kids or a mortgage, or less later in life—universal life gives you options like that.
Key Features of Universal Life Insurance
Lifelong Coverage
Once you buy the policy, you’re covered for life—no need to renew it every few years. This means your loved ones will receive a death benefit no matter when you pass away (assuming the policy is kept in force).
Flexible Premiums
You’re not locked into paying a fixed amount each month. You can adjust your premiums (within limits), as long as there’s enough money in your cash value account to cover the insurance cost.
Cash Value Growth
Part of the money you pay goes into a cash value account. This grows over time, typically at a rate set by your insurer (often linked to current interest rates). You can borrow or withdraw from this cash value, although it may reduce the death benefit.
Adjustable Death Benefit
You can increase or decrease the death benefit (with approval from the insurer), which is helpful if your financial situation changes.
But it’s important to keep an eye on the policy. If the interest rates are low or you take out too much money, your policy could lose value or even cancel itself. It’s not something you can just “set and forget.” You’ll want to check in on it from time to time to make sure everything’s still working the way you want.
Overall, universal life insurance is a good choice if you want lifelong coverage and like the idea of building up some savings in the same plan. It gives you protection, flexibility, and room to grow your money—but it does need some attention along the way.
Did you know…?
You Can Use It to Supplement Retirement Income
The cash value in a Universal Life policy grows tax-deferred, and you can take tax-free loans or withdrawals (if structured carefully) in retirement. Some people use UL insurance as a backup savings tool to add extra income in their later years—especially during market downturns when other investments are struggling. It’s not a replacement for a registered retirement income fund, or pension , but it can be a smart supplement if managed properly.
You Can Lose Coverage If the Policy Isn’t Properly Funded
Many people think once they buy Universal Life insurance, it’s guaranteed to last forever. But that’s only true if you keep enough money in the policy to cover the costs. If the interest earnings are lower than expected, or if you reduce or skip payments for too long, the cash value can run out—and the policy could lapse (meaning you lose your coverage), even after paying for years.
You Might Be Able to Skip Premium Payments for a While
If your policy has built up enough cash value, you can actually pause or reduce your payments, and the policy will stay active by drawing from the cash value to cover costs. This can be a lifesaver during tough financial times. But it’s not automatic—you need to check how much is in your account and make sure it’s enough to keep the policy going without putting it at risk.
