What is universal life insurance?
Universal life insurance is a type of permanent life insurance offering the flexibility to change your death benefit and adjust your monthly premiums. Like whole life insurance, universal life insurance coverage lasts your entire lifetime and builds cash value that you can borrow against while you’re alive. The difference is, as your finances fluctuate, you can alter or potentially skip premiums on universal life policies and increase or decrease the payout amount to your beneficiary.
What can universal life insurance cover?
Here are some typical uses for universal life insurance:
- Loss of income
- Mortgage costs
- Estate planning
- Educational needs
Benefits of universal life insurance
Universal life policies can empower you with several unique advantages:
As the cash value component of your policy builds, you have the power to adjust your premium payments and even use it to pay your monthly premium. Eventually, your cash value policy could build into a zero-cost policy, where all premiums can be paid from the cash value that has built up, while keeping the same payout amount (death benefit).
Length of coverage
With permanent life insurance, you get benefits no matter when you pass away, as universal policies will last for your entire lifetime (assuming you continue to make payments).
Tax-free growth and death benefit
The payout to your universal policy’s beneficiary is typically tax-free. Additionally, the growth within your policy’s cash value component is generally tax-free.
You can borrow against the value of your policy at a rate set by your insurer.
Learn more about life insurance
Progressive Answers helps break down the basics of life insurance.