Universal Life Insurance – Insurance Definition of the Week

Universal life coverage can be quite confusing. Basically it is an adjustable benefit life insurance policy that accumulates account value over time. Each time one makes a premium payment, a small percentage is deducted as an expense fee and the rest is added to the policy’s account value, which also earns interest monthly. One of the biggest benefits of this account is that it has a flexible premium. Therefore, one can change the death benefit and premium payments in order to suit their changing needs.

Other benefits of universal life insurance include account tax-deferred account value growth. According to State Farm, “Your policy’s Account Value earns interest at the company’s current interest rate — federal income tax deferred. The current interest rate is guaranteed to be at least 4% a year.” In addition, one can also make withdrawals from their policy if necessary, and at that time, they will then pay taxes on the cash withdrawn. Overall, universal life insurance is good if you need a policy with the flexibility to make changes in accordance to your lifestyle.

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