Universal Life (UL) Insurance is a type of cash value life insurance.  Under the terms of a universal life insurance policy, excess premium beyond the current cost of insurance is credited to cash value in the policy.  This is credited, with interest, each month.  The policy is charged each month for the cost of insurance (COI) as well as any other charges and fees from the cash value.  This is done even if a premium payment is not made that month – providing there is still enough cash value to pay the cost of insurance.  Interest that will be credited to the account is determined by the insurance carrier, but has a contractual minimum rate – 2.5%, for example.

When the earnings rate is fixed to a financial index such as a stock, bond or another indexed interest rate, the contract is an “Indexed Universal Life Insurance” policy.  These offer an advantage of guaranteed level premiums throughout the insured’s life at substantially lower premiums than any equivalent whole life policy at first.  The cost of insurance always increases, as reflected in the cost index table located in the policy contract.  This will allow for easy comparison of costs between carriers.