How Does A Universal Life Insurance Policy Work?

Family looking a sunset while they have a universal life insurance

Want to know how a universal life insurance policy works? Let’s take a look at universal life insurance and what it offers compared to other policies.

Are you looking for lifelong insurance coverage? Universal life insurance is an option worth considering. A permanent form of life insurance, universal life coverage provides coverage for your entire life, and some build cash value over time. 

Universal life insurance offers benefits and flexibility that other policies don’t provide. If you’re asking, why buy universal life insurance, we’ve got answers for you. Let’s take a look at universal life insurance and what it offers compared to other policies.

What Is Universal Life Insurance?

Universal life insurance is a permanent life coverage that protects you for the entirety of your life – as long as premiums are paid, of course. Some types of universal life insurance offer a cash value component that can build up investment gains. 

You can also take a loan or a withdrawal out of the cash value of your policy. Also known as a cash value policy, a universal life insurance policy has a savings account inside. Of course, if you take money out of your policy, any outstanding money due will be taken out of your beneficiaries’ payouts. 

Father and son doing hiking while they have universal life insurance policy

Universal Life Insurance VS. Whole Life Insurance

Universal life insurance and whole life insurance policies are very similar, yet they have differences that make them unique. For one, a whole life policy has a fixed death benefit, while a universal policy allows you to adjust the death benefit if needed. 

Another difference is that a universal life insurance policy has a market-set rate; a whole insurance policy has a fixed rate of return that’s guaranteed for the policy’s life. Additionally, universal coverage allows you to adjust your premium, while a whole life insurance policy has a fixed premium.

Universal Life Insurance Types

  • Indexed universal life insurance – Though it offers lifelong coverage, the cash value of this policy is linked to the stock market. This means that if the market is doing good, the cash value increases. However, there’s a downside: If the market dives, your life insurance policy drops, too.
  • Guaranteed universal life insurance – The least risky universal insurance policy, a guaranteed policy, ensures that your premiums stay the same, no matter how well the index performs.
  • Variable universal life insurance – You can invest the cash value part of this policy into a mutual fund. While your risk is diversified this way, a variable policy focuses more on investing instead of supporting your loved ones.

How To Buy Universal Life Insurance

Making the right universal life investment is essential for your financial future. InsureOne offers multiple universal life insurance options to fit your unique needs and budget. We take the guesswork out of choosing a policy and easily find the perfect one for you. Get a free universal life insurance quote online, over the phone, or at one of our offices near you.