What is universal life insurance?

Universal life insurance is best described as a flexible premium life insurance policy that combines a death benefit with a cash value component that can grow over time. This type of policy allows policyholders to adjust their premium payments and death benefits, providing greater flexibility compared to traditional whole life insurance.

The cash value accumulates on a tax-deferred basis and can be accessed by the policyholder through loans or withdrawals. This feature appeals to individuals who want both life insurance protection and a way to build savings. Additionally, the premiums can be adjusted, providing policyholders with the ability to pay more or less each year depending on their financial situation and needs.

In contrast, the other options do not accurately represent universal life insurance. Fixed premium policies lack the flexibility characteristic of universal life, temporary coverage with no cash value does not align with the investment aspect of universal life, and coverage only for longevity risks does not encompass the broader features of universal life insurance, which specifically integrates life coverage and a cash value investment component.