Understanding the Policy

A flexible permanent life insurance policy with the highlight that the cash value can be used to pay out the premiums.

You pay a monthly or annual premium with a savings component called the cash value. Cash value earns interest on a variable rate over time and the amount you earn can be used to pay the premium amount too. In case of your death, the remaining amount will go into the tax-free death benefit. However, the variable interest rate incurs quite a low rate of returns on the investment in this policy i.e. around 2% only.


Policy Highlights


  • Cash value can be used to pay the premiums, can be borrowed against or withdrawn
  • Tax-free death benefit
  • Best for people with special needs children or life-long dependencies
  • Allows adjustments in premiums, cash value and death benefit over time
  • The contracted coverage (death benefit etc.) remains the same, funded by the cash value.


  • Variable interest rate that earns a very low rate of return or the cash value.
  • At least 6 to 10 times more expensive than the term life insurance


  • Lifetime
  • As long as you keep paying premiums

Flexibility in Cash value

  • The cash value in the universal life insurance policy can be invested in bonds, equity markets, stock markets, and other market options.
  • A variable interest rate and a rate of return are fixed by the insurance company which is paid whether the company’s portfolio experiences gain or loss in the market. If it gains more than expected you get a portion of the additional gain as well in your account.
  • The savings element, premiums, and death benefits are subject to adjustment as the policy holder’s situation changes over time.
  • The cash value amount can be used to pay the premiums after a certain time and you can continue to do so for a set period only.
  • You can borrow a tax-free loan against the cash value.
  • You can also withdraw money from the cash value which is then subject to taxes.

Types of Death benefit

  • Level death benefit: The cash value and death benefit stay level throughout the policy and it pays either the death benefit or the cash value whichever is greater at the end.
  • Increasing death benefit: Both the cash value and death benefit increases over time and in the end both are paid out as death benefit.

Cost of universal life insurance?

Universal life insurance has a guaranteed and adjustable cash value which makes it more expensive than term life insurance. The actual cost of the policy depends upon:

  • Type of policy you purchase
  • The amount of cash value, death, benefit, and interest rate is given by the insurance company.

Ask our experts to learn more about the types of universal life insurance!