What is UNIVERSAL LIFE?
Response: Universal Life is a form of permanent insurance in which the cash value builds at CURRENT or prevailing interest rates. It also allows more flexibility in adjusting premiums and face amounts than traditional permanent policies called “whole life policies.” We can think of a Universal Life policy, often called a UL policy like this: As you pay premiums into the policy, they go into a bucket of money or a savings type plan. This cash value is growing at a certain interest rate, called the CURRENT rate. This is the interest rate that is ACTUALLY being credited at this point in time. This interest rate is also called the nonguaranteed rate. From this cash value, the insurance company pulls a relatively small amount to pay for the risk of your dying. This is the internal cost of insurance, which is sometimes abbreviated as the COI. So, as you put money into the bucket, it is growing at the current rate of interest. There is also a COI being deducted from this account.
