Universal life insurance is a form of permanent insurance, meaning coverage can last for your lifetime so long as premiums are paid. This is in contrast to term life insurance which only provides coverage for a set period of time, such as 10 or 20 years. Universal life insurance has a cash value component that is separate from the death benefit. Each time you make a premium payment, a portion is put towards the cost of insurance (such as administrative fees and covering the death benefit) and the rest becomes part of the cash value. The cash value is guaranteed to grow according to a minimum annual interest rate, but may grow faster depending on the insurer’s market performance.
The premium can be flexible; you can choose how much you pay so long as it falls between the minimum and maximum premium amounts.
With Universal Life it is important to pay premiums as illustrated on time. Paying the premium late or early can have an effect on the coverage duration.