What are the characteristics of universal life insurance?
Asked by: Tia Hirthe | Last update: January 9, 2026Score: 4.4/5 (41 votes)
What is one way to characterize universal life is as an insurance policy?
Universal life insurance policies offer flexible premiums that may allow you to adjust how much you'll pay each year by accessing some of the policy's cash value (though you will need to pay a minimum required amount or the policy will lapse).
Which of the following is not a characteristic of universal life insurance?
Final answer: Universal life insurance is a type of permanent life insurance policy with a flexible premium and a cash account. The characteristic that is NOT associated with universal life insurance is the unbundled premium.
What is the major advantage to universal life insurance?
Pros: Benefits of Universal Life Insurance Policies
Flexibility in Premium Payments: One of the most significant benefits of UL policies is the ability to adjust premium payments. You can increase, decrease, or skip premium payments if the policy's cash value sufficiently covers the costs.
Which of the following best describe a universal life insurance policy?
Final answer: A universal life insurance policy is best described by the combination of a flexible premium deposit fund and a monthly renewable term insurance policy. This policy type combines the elements of term insurance with a savings component that can be invested.
This Is Why Universal Life Insurance Is CRAP!
What is the disadvantage of universal life insurance?
Some of the drawbacks include caps on returns and no guarantees as to the premium amounts or market returns. An IUL insurance policy may be canceled if you stop paying premiums. IUL policies are generally best for those with large up-front investments who want options for a tax-free retirement.
Can I take money out of my universal life insurance?
A policy owner of universal life insurance has the ability to access their cash in the form of either a life insurance loan, life settlement, or viatical settlement. It is important to remember that withdrawals from a policy's cash value reduce its death benefit and have different tax consequences.
Which is better, whole life or universal life?
Generally, whole life is simpler and more predictable, and universal life allows for more flexibility throughout the duration of your policy. Explore Progressive's editorial standards for Answers articles to find out why you can trust the insurance information you find here.
What happens to cash value in universal life policy at death?
Your cash value typically does not get passed on to your beneficiaries after you die, so you may want tap into it to supplement your retirement income, fund a house remodel, or pay for a grandchild's college tuition.
How do rich people use IUL?
Estate planning individuals who use it as a tax-efficient way to transfer wealth to the next generation. It can protect against probate issues and they also use IUL to pay estate taxes. Retirement income investors, see it as a long-term savings plan and a stream of income during retirement.
What is a characteristic of a universal life insurance policy?
Universal life is a form of permanent life insurance that gives policyholders flexibility in paying premiums, a cash savings component, and a death benefit. Universal life insurance allows you to borrow against or cash in your savings portion, which grows tax-deferred over your lifetime.
What type of life insurance is best?
A whole life policy is generally considered the most secure form of insurance. Whole life policies have more rigid premium payment requirements than universal life policies. As long as scheduled premium payments are paid, the cash value is guaranteed to increase each year.
Which of the following are universal characteristics of life?
Big Ideas: All living things have certain traits in common: Cellular organization, the ability to reproduce, growth & development, energy use, homeostasis, response to their environment, and the ability to adapt. Living things will exhibit all of these traits.
How does a universal life insurance policy work?
Universal life policies work in a similar way to other permanent policies. In exchange for premiums, you typically get lifelong coverage and your beneficiaries receive a payout when you die. You also have the opportunity to build cash value and take out loans while you're still alive.
What is the face amount of a $50,000 graded death benefit?
For example, with a $50,000 graded death benefit policy, the initial face amount may be $10,000 in the first year, then increase to $20,000 in the second year, and so on, until it reaches the desired coverage amount of $50,000.
Which of the following statements about universal life insurance is not true?
Explanation: The statement that is NOT true about universal life insurance is that 'The cash value interest rate must equal or exceed a guaranteed minimum value'. Universal life insurance policies do not guarantee a minimum interest rate on the cash value component.
Do you get the cash value and the death benefit in an IUL?
IUL Insurance is a permanent life insurance policy offering both a death benefit and a cash value component. The cash value in an IUL policy earns interest based on a stock market index, like the S&P 500, with cap and floor rates limiting risk and reward.
Which of the following actions is not possible with a universal life policy?
Which of the following actions is NOT possible with a Universal Life Policy? Premiums may be applied as a credit against income tax. All of these actions are possible with a Universal Life policy EXCEPT "Premiums may be applied as a credit against income tax".
How to calculate cash value of universal life insurance?
Fortunately, it's easy to calculate your cash surrender value. First, add up the total payments you've made toward your life insurance policy. Then, subtract the surrender fees your insurance company will charge. You'll be left with the actual payout you may receive if you terminate or surrender your life insurance.
What does Suze Orman say about universal life insurance?
One of my key life insurance rules is this: Stick with term life insurance. Unless you have someone in your family with special needs, there is typically no need to buy whole life, or universal life, which are referred to as “permanent” policies and cost a lot more.
What happens if I outlive my universal life insurance?
If you are still living when a universal life insurance policy matures, you may be able to receive a lump-sum payment equal to the cash value of your policy. However, this generally only occurs for plans that have maturity dates, and only if the insured person has outlived the maturity date.
What is the best age to buy universal life insurance?
Again, buying a Permanent or Universal life insurance policy in your 20's will allow for accumulation of considerable sums of money (lower premiums plus a cash value) and can actually save a fortune in years to come.
What is the 7 pay rule for IUL?
What is the 7 pay rule for IUL? In simple terms, the IRS “7-Pay Test” states that if the cumulative premiums paid during the first seven years exceed the amount needed to have the policy paid up in seven level annual payments, the policy becomes a Modified Endowment Contract (or MEC).
What is the cash value of a $10,000 whole life insurance policy?
Most whole life insurance policies mature at 121 years, although some mature at 100 years. Say, for example, that you purchase an insurance policy with a face value of $10,000. Once the policy matures, the cash value of the policy should equal $10,000.
What happens if you stop paying premiums on universal life insurance?
Life Insurance
Term: If you stop paying premiums, your coverage lapses.