What is a universal life insurance policy?
Universal life insurance is a type of permanent life insurance that has both a death benefit and a cash value component. Your policy will remain in effect as long as you pay premiums or stay alive. There are three types of protection: indexed generic resource, variable generic resource, and guaranteed generic resource.
Insurers have a certain level of flexibility compared to other types of permanent life insurance policies, as you can lower your premiums or change your death benefit. In addition, the cash value component offers more opportunities to earn more interest – on the other hand, the value may decrease over time.
In particular, the cash value component earns interest based on the money market interest rate or, for certain types of universal policies, a market index-linked rate. Everything you earn will increase your cash value, which will help pay your insurance premium. Reducing your monthly payments can be helpful if your financial situation changes.
Be aware that this will eat into your cash value – if there aren’t enough, you’ll have to make up the difference or your policy will expire.