Universal life is a type of permanent life insurance. Its main job is the same as any life insurance: to pay a death benefit to the people you name. What sets it apart is flexibility. Within limits, you can often change what you pay, and sometimes the amount of coverage.
As a family-owned independent agency, CBIS compares universal life designs from many insurance companies, and we tell you plainly when term, whole life or a simpler policy fits better.
How universal life works
Protection comes first
Universal life is designed to last your lifetime, as long as the policy has enough funding to cover its costs. The death benefit goes to your beneficiaries.
Payments can flex
You can often pay more in some years and less in others, within limits. Paying too little for too long can leave the policy short.
There is a cash value inside the policy
Part of what you pay covers the cost of the insurance. The rest goes into a cash value account that earns interest under the policy’s rules. Think of it as a feature that helps keep the policy funded, not the reason to buy it.
Costs come out every month
The cost of insurance and fees are taken from the policy each month. Those costs generally rise as you get older. If the cash value cannot cover them, you may need to pay more or the policy can lapse, which means coverage ends.
Types of universal life
- Guaranteed universal life (GUL). Built around keeping coverage in place to a set age if you make the planned payments, usually with less cash value.
- Traditional universal life. Flexible payments, with cash value that earns interest set by the insurance company.
- Indexed universal life (IUL). Interest credited is linked to a market index, within limits set by the insurance company. See indexed universal life.
Things to understand before you buy
- Underfunding. Paying the minimum for years can leave too little in the policy later, especially as costs rise with age.
- Reviews. Universal life usually needs a check-in every year or two so your payments stay on track.
- Loans and withdrawals. Using cash value lowers the death benefit and can affect whether the policy stays in force.
Universal life with living benefits
Some universal life policies let you use part of your coverage early if you are diagnosed with a qualifying terminal, chronic or critical illness. Using it lowers what your loved ones receive. Availability, amounts and cost vary by policy and state. Learn how living benefits work.
Is universal life a good fit for you?
It may fit if you:
- Want coverage that lasts your lifetime and need room to change payments over time
- Are converting a term policy and prefer flexibility over a fixed design
- Are comfortable reviewing the policy with an agent every few years
If you want a set payment you never have to think about, whole life is often simpler. If you need coverage only for a set number of years, start with term life.
Universal life questions
Is universal life the same as whole life?
No. Both can last a lifetime, but whole life usually has a level payment set when the policy starts and a more fixed design. Universal life lets you adjust payments within limits, and needs more attention to stay funded.
What happens if I stop paying?
If the cash value can still cover the policy’s costs, coverage may continue for a while. If it cannot, the policy can lapse and the death benefit ends. That is why underfunding is the main risk to watch. We show you funding scenarios before you buy.
Is universal life an investment?
No. It is life insurance. The cash value is part of how the policy works, and it is not a substitute for an investment or retirement plan.
Already have a universal life policy?
We review any life insurance policy for free and tell you honestly if it still fits. Get a free policy review.
Want a clear look at universal life?
A licensed CBIS agent will walk through funding, costs and the other options with you, by phone or video call. Call (858) 283-7575 or book a free call.