Benefits

• Universal life insurance gives you flexibility. Premium payments can be changed every month or every year. Death benefits can be adjusted up or down whenever you want, although some changes may require insurance company approval. Finally, your universal life insurance may build cash value, which can be used for any purpose throughout your life.
  
  

Drawbacks

• Universal life insurance is driven by its cash values and, although many policies have a minimum account value guarantee, the policy is driven largely by assumed interest rates instead of any substantial guarantees in the policy. Premiums are paid directly into the cash value account. Costs are deducted from the account. Then, interest is credited to the account. If the cash value account ever drops to zero, the policy terminates and you lose your insurance. Various interest crediting strategies for universal life, like mutual fund investments, could actually cause the cash value account to drop to zero without any intervention from you, and even if you are paying the required minimum premium amount.
  
  

Considerations

• Make sure you understand your insurance company's universal life insurance policy. Ask the company's representative about the policy's provisions and any protections built into the policy that would prevent the policy from lapsing. Also, ask the company about the minimum guarantees, if any, that the company is willing to offer on the policy.