What is meant by "universal life insurance"?

Universal life insurance is a type of flexible premium life insurance that effectively merges the features of a traditional life insurance policy with an investment savings element. This structure allows policyholders to adjust their premiums and death benefits, providing a level of adaptability not typically found in other life insurance products.

Specifically, universal life insurance enables the policyholder to pay varying premiums within certain limits and decide how much of the premium goes toward insurance costs versus savings or investment. The savings element accrues interest on a tax-deferred basis, thus enhancing the policyholder's investment potential over time. Additionally, the death benefit can generally be adjusted upward or downward, depending on the policyholder's financial situation or needs.

This combination of lifelong protection and a savings component with premium flexibility makes universal life insurance a distinctive and attractive option for many individuals seeking both insurance coverage and investment opportunities.