Universal life insurance is a type of permanent life insurance that provides lifelong coverage and also includes an investment component. Unlike term life insurance, which provides coverage for a specific period of time, universal life insurance provides coverage for the entire lifetime of the insured person, as long as the premiums are paid.
The investment component of universal life insurance is called the “cash value” component. A portion of the premiums paid on a universal life insurance policy is invested and builds cash value over time. This cash value can be used to help pay the policy’s premiums, and in some cases, can be borrowed against or used as a source of savings.
One of the benefits of universal life insurance is that the policyholder has more flexibility in terms of premium payments and death benefit levels. They can typically adjust their premium payments and death benefit levels, as long as the policy remains in force. The policyholder can also choose the investment options of their policy, which can include bonds, stocks, and real estate.
The cost of universal life insurance is typically higher than that of term life insurance because it provides coverage for the entire lifetime of the insured person and includes an investment component. It’s important to understand that the cash value component of the policy is not guaranteed and is dependent on the investment performance and the fees charged by the insurance company.
It’s important to work with a financial advisor or an insurance agent who can help you understand the different options available and find a policy that fits your specific needs.
