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Universal Life

Universal life insurance is made up of two components:  annual renewable term life insurance and a cash accumulation fund. This concept of bundling components is not new, it has been round for a while. Early Universal Life policies were made up of term life insurance and a deferred annuity. Universal Life insurance policies were introduced into the industry in 1980. In 1981, some of the major insurance carriers began marketing and selling the Universal Life product. By late 1983, nearly every major carrier had a Universal Life product to sell; some of them had more than one version of the product. By 1984, Universal Life became an established product.


Universal Life insurance is designed to meet life insurance and investing needs. It combines long term insurance protection with tax advantage investing all in one policy. This type of policy gives you flexibility from how you want to invest to how you want to pay for insurance. Many customizable options are available to meet your needs. One of the problems with this type of policy is its low returns on the investment component.


One of the attractive components of this type of policy is its flexibility. You can pay as much or as little as you wish.  You can stop and start payments. The biggest negative with this type of policy is the type of term insurance bundled up in the product. It uses annual renewable term. Annual renewable term is the most expensive type of term insurance. As the name implies, it renews every year and its cost goes up every year as you age. The cost can increase so much that it can become unaffordable in the later years.

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