Universal Life Insurance

Universal life insurance is the plan for someone who needs flexibility. These policies are interest-sensitive and permit the owner to adjust the death benefit and/or premium payments, within limits, to fit the owner's situation.

Your net premium payments are applied to the accumulation fund, which earns a guaranteed interest rate. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund.

As with whole life insurance, the cash value is yours — you may withdraw it or borrow against it at any time.

Read your policy carefully to understand how withdrawals may affect the death benefits. Since you decide how much premium to pay, within limits, some universal life policies even allow you to skip payments.

If you skip a premium payment, the administrative and death benefit costs are deducted from your cash value. The policy stays in effect until your cash value can no longer cover these costs.

Make sure you understand your annual statement so you know how much interest your policy is earning and how much cash value you have. Universal life insurance rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract.