Universal life insurance is type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance), which is invested to provide a cash value build-up. The death benefit, savings component and premiums can be reviewed and altered as a policyholder's circumstances change. Unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his accumulated savings to help pay premiums over time.
Yes, it is expensive compared to other insurance but it provides you with investment option and higher cash value compared to others. Whole life insurance has a tendency to be more expensive than term life insurance in that it is permanent and consists of a number of benefits that term does not have. However, it may not be the most expensive form of life insurance that you can invest in. Universal life insurance may have the higher premium because it allows for a variable premium, which means the premium changes. Whole life insurance has a fixed premium. But if you do come upon hard times and can't pay your premium, you may have some options available to you. One of those options is that whole life insurance gains cash value.
The flexibility that a universal life policy provides is a key differentiator over whole life. As a result, universal life insurance premiums are typically lower during periods of high interest rates than whole life insurance premiums, often for the same amount of coverage. Another key difference would be how the interest is paid. While the interest paid on universal life insurance is often adjusted monthly, interest on a whole life insurance policy is normally adjusted annually. This could mean that during periods of rising interest rates, universal life insurance policy holders may see their cash values increase at a rapid rate compared to those in whole life insurance policies. Some people may prefer the set death benefit, level premiums, and the potential for growth of a whole life policy. However, for those who would prefer to have more flexibility and options when it comes to their permanent life insurance, then universal life might be the better choice.