Universal life (UL) insurance is a flexible permanent life insurance policy. Like whole life, it provides permanent coverage and builds cash value. Unlike whole life, it allows you to adjust your premium payments and death benefit within limits. Fixed Indexed Universal Life (IUL) ties cash value growth to a stock market index with a floor (typically 0%) — you can't lose principal in a down market. Variable Universal Life (VUL) invests in sub-accounts similar to mutual funds — higher potential returns but also market risk.
Key Points
- Flexible permanent coverage — can adjust premiums and death benefit within limits
- Builds cash value like whole life but with more flexibility
- Fixed Indexed UL (IUL): cash value tied to market index with 0% floor
- Variable UL (VUL): invests in sub-accounts — higher potential but market risk
- More complex than term or whole life — requires ongoing management
- Best for people who need permanent coverage with flexibility