What defines a universal life insurance policy?

A universal life insurance policy is distinguished by its combination of flexible premium payments and adjustable death benefits, along with a cash value component. This flexibility allows policyholders to adapt their premiums and death benefits according to their financial situation and needs. For instance, one can increase or decrease the death benefit (subject to underwriting requirements) and adjust the premium payments to align with changes in income or financial obligations.

The unique feature of universal life is its cash value accumulation, which grows based on current interest rates, offering a savings component that can be accessed during the policyholder's lifetime. This structure makes universal life insurance appealing to those who seek both protection and savings options in their insurance plan, as it provides the ability to modify aspects of the policy over time.

In contrast to other options, a fixed premium with a fixed death benefit would characterize whole life insurance, while term insurance does not build cash value and is focused solely on providing coverage for a specific term. The idea that universal life policies are exclusively for senior citizens misrepresents the broad applicability of this type of insurance, as it is suitable for individuals of various age groups depending on their financial needs.