What Is Universal Life Insurance and How does it work?


Universal life insurance is one of many types of permanent life insurance. It offers flexibility in terms of monthly premiums, death benefits, and investment options.

First, universal life insurance provides a death benefit to the policy holder’s beneficiaries when he or she dies. The death benefit is based on the amount paid in premiums over the years with generally no limits imposed on the amount that can be withdrawn when taking out this type of coverage. The policy can be written on an IRS “permanent” life insurance

A key to understanding how universal life insurance works is to look at the difference between the terms permanent and universal. Permanent life insurance provides a death benefit during a person’s lifetime. However, it does have some limitations and does not allow for the investment of funds.

Universal life, on the other hand, allows for a withdrawal of funds during the policyholder’s lifetime. In turn, there are restrictions on the ability to withdraw funds and have them remain within the policy.

Universal life insurance policies are designed to hold a specific amount of cash value which is determined based upon the number of premiums paid in overtime. When the policyholder stops paying premiums, or if he or she dies before the cash value has reached its maximum, any funds that were in excess of that amount will be returned to his or her estate.

These policies pay a death benefit when the insured dies, but also feature a guaranteed minimum payment. In other words, this type of insurance is designed to protect the policyholder and his family.

Also, Read;

What Is Universal Life Insurance and How does it work
What Is Universal Life Insurance and How does it work

How does Universal Life Insurance Work?

Universal life insurance is a relatively new type of insurance that can provide coverage for any type of life event. It’s a popular choice for people considering long-term care, so they can make sure that their loved ones will be taken care of in the event they are no longer able to do so. However, it’s not just limited to this; universal life insurance can also provide coverage if you have some sort of accident or short-term health issue, such as an injury at work. With this type of insurance, the policyholder has several options that can be used to determine their level of coverage.

Ways to Increase Coverage

Universal life insurance is a flexible type of insurance that allows you to increase your coverage whenever you feel like you need more protection. One of the most common methods used to increase coverage is by adding additional cash values to the policy. This increases the potential return on investment, as well as provides more coverage against any given life event. It’s a convenient type of insurance to use because you can set it up to automatically increase your coverage whenever you want. Anytime you see fit, you can simply increase your coverage without having to worry about whether or not you have enough money on hand.

Universal life insurance also makes it easy to protect yourself against any type of changing financial situation as well.

What is fixed universal life?

Fixed Universal Life is insurance that combines a death benefit and a savings account. It offers a guaranteed death benefit for people who would otherwise be insurable in whole or part.

Benefits of Fixed Universal Life Insurance:

  • Guaranteed death benefit
  • Savings account with no limits on age or investment amount
  • Flexibility to invest in the markets at any time, including before you purchase insurance
  • Additional savings when you die due to increasing interest rates over the life of the policy.
  • Tax-saving savings account revenues
  • Provides a guaranteed death benefit when you are unable to work, retired or disabled
  • Additional annuity protection if required.
  • Don’t need to be an experienced investor to get results.

Fixed Universal Life can be purchased as a whole life policy with an immediate payment of the death benefit, as well as a savings account. It can also be purchased outside life insurance and held with a bank in an FDIC insured account.

Universal Life Insurance Pros and Cons


  • doesn’t cost anything
  • can be paid for with a lump sum or with regular payments
  • can be kept up to date by just one person


  • has no payout if your policy is terminated and you cannot pay off the loan or find another source of income
  • in some cases, your beneficiary might not be able to collect on your policy when you die if you come into an unexpected lump sum from another source.
  • the interest rate is usually higher than a traditional policy
  • you can’t get term insurance, because it’s always life insurance.
  • you can’t get annuities in this type of policy.

What is universal life insurance in simple words?

Universal life insurance is a type of insurance coverage that pays out a death benefit to the policyholder and their beneficiaries. It is typically long-term coverage, with an accumulation of funds through ongoing premium payments. The death benefit can be paid out over the term of the policy or may be paid in one lump sum at the end of the term.

Does universal life insurance expire?

This is a common question that many people may have asked before. The short answer is no, universal life insurance does not expire. However, there are some limitations in the company’s policies that may make it become inactive for various reasons. What makes this question so important to decide on is that you can never tell when something like this might happen and be forced to buy a new policy with entirely different terms and rates. This can be especially expensive if your premiums increase day by day or month by month.


After reading this blog post, you will have a better understanding of Universal life insurance and how it will help you secure your future. We hope that after reading this, you will be curious to learn more about how Universal life insurance works so you can see if it’s right for you.

If you have any questions, please don’t hesitate to reach out to us. Thank you for reading, we would love to hear from you!


Leave a Comment