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Find top-rated universal life policies with the adjustable coverage and cash value growth you need.

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Katia Iervasi
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Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Policygenius
Policygenius
18 - 85 years old
$50,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on provider and policy
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JRC Life Insurance
JRC Life Insurance
18 - 85 years old
$5,000
$50,000,000
10, 15, 20, 25, 30, 35, 40 years to lifetime/age 121
May be required
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Sproutt
Sproutt
18 - 60 years old
$50,000
$4,000,000
5, 10, 15, 20, 25 and 30 years
No
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Fabric
Fabric
21 - 60 years old
$100,000
$5,000,000
10, 15, or 20 years
Depends on policy
No-exam term policies up to $1 million online, with the option to upgrade to permanent life insurance later.
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This article was reviewed by Andrew Flueckiger, a member of the Finder Editorial Review Board and certified insurance counselor and licensed insurance agent in five states.

Universal life insurance lets you change your premium or death benefit, and you can use the policy’s cash value to pay premiums. But the investments that help you grow your cash value involve more risk and a hands-on approach than term or whole life policies.

How does universal life insurance work?

Universal life insurance is a permanent policy offering lifelong coverage with an investment feature that builds cash value on a tax-deferred basis, which means you won’t pay any taxes on current earning or interest. Also called adjustable life insurance, this policy has a flexible premium and death benefit, allowing you to adjust it at any time.

When you die, your beneficiaries will get a guaranteed death benefit equal to the policy’s face value, which is the amount of coverage you bought like $250,000.

How the cash value works

Similar to whole life, part of your premium gets invested to build cash value. Once you’ve built enough value, you can take out tax-free loans or use the cash to cover premiums.

However, the interest you gain fluctuates with the market, and that investment risk depends on whether you buy a traditional, indexed or variable universal policy.

How much does universal life insurance cost?

Expect typical rates between $150 to $250 a month for a $500,000 policy if you’re young and healthy, according to our analysis of over 200 universal life quotes.

But with universal life insurance, you can adjust your premium and death benefit to suit your needs and financial situation.

Is universal life insurance right for me?

Universal life policies are best suited to people who need lifelong coverage with some flexibility or for investors, such as:

  • Parents with special needs children who may have different financial needs over time
  • Wealthy individuals who want to use their policy as an estate planning tool to build a tax-free inheritance for their heirs
  • Investors comfortable with the risk of a policy based on the stock market or a mutual fund performance
  • People who want coverage for life but want to adjust their coverage and premiums as they get older

Do I need to take a medical exam?

Most likely. But check your insurer’s application requirements to see whether you’ll take a medical exam or fill out a health questionnaire.

How do I use the cash value of my policy?

Think of the cash value as a tax-free savings tool. When you’ve built up sufficient cash value over several years, you can use it to:

  • Take out a tax-free loan. Your insurer will subtract the loan amount from your death benefit, and the loan does gain interest.
  • Pay your premiums. The cash value your policy gains over time can be used to pay for your premium.
  • Supplement your retirement. Many policyholders treat the cash value component as another way to save for retirement, especially if you want to access your money during early retirement.

How do I use universal life insurance for retirement?

To use universal life insurance as retirement income, you can add life insurance policy withdrawals to your 401k and Social Security benefits. You also can use the cash value to cover premiums if there’s enough built up.

Types of universal life insurance

You can buy several different types of universal life insurance, and the main differences are each policy’s investment risk. Types to consider:

1. Indexed universal life insurance (IUL)

Indexed universal life policies let you tie its cash value to a market index like the S&P 500 or Nasdaq 100. But the index may be capped, limiting how much you can earn with an IUL.

As an example, if the S&P index is capped at 4%, your policy builds cash value up to 4%, even if the index earns more than that amount.

You can see policy caps up to 9%, though the historical return on IUL investments is around 7%, according to Witt Actuarial Services, a financial risk consulting firm.

Even if the policy cap is high like 9%, you may only receive part of the interest gained if your policy’s participation rate is less than 100%.

2. Variable universal life (VUL)

A variable universal life policy is similar to an indexed policy since its investments go up and down with the market. But you get to choose your investments.

This option offers the highest potential return, but it involves higher risk than other policies. It’s best for high-income earners with investment experience.

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Traditional vs. indexed vs. variable

Compare the key features of these universal life policies to help you decide which is right for you.

TraditionalIndexedVariable
PermanentYesYesYes
Builds cash valueYesYesYes
Policy options — death benefit and premiumsFlexibleFlexibleFlexible
Cash value ratesFixed by providerTied to market indexTied to investment you choose
Potential for investment growthConservative, stableAssertive, fluctuatingFluctuating, high risk

Can you cash in a universal life policy?

Yes. If your financial obligations drop off and you no longer need life insurance, you can surrender your policy and collect the cash as a surrender value. This is typically an option after you’ve had the policy for a few years.

Pros and cons of universal life insurance

Pros

  • Lifelong coverage. Your policy stays in force for your entire life, as long as you pay your premiums.
  • Cash value growth. A portion of your premium goes into a savings-type account and earns interest over time.
  • Flexible premiums. You can change your premium and coverage level — ideal if you foresee income or major life changes.
  • Tax advantages. You can take out tax-free loans against your policy, and the death benefit paid out isn’t taxable.

Cons

  • Expensive. Universal life insurance can be six to ten times more expensive than a term life policy because you have coverage for life.
  • Limit on returns. Your insurer will cap your cash value returns, so ask about the participation rate before signing up.
  • You can lose the cash value. Your beneficiaries only get the face value of the policy minus any loans, not the cash growth.
  • Poor returns. Interest rates can be more conservative than other types of investments.

Ask an expert: Who is universal life insurance best for?

Head shot of Jeff Busch

Jeff Busch
Licensed life insurance agent and CFF at Lift Financial

Universal life insurance is best for someone who is able to comfortably contribute the maximum premium the policy will allow. This type of plan comes with a minimum and a maximum premium. When you contribute more than the minimum, you will accumulate cash value in an interest earning account. This interest accrues tax-free, which can be significant in the long run. Accumulated cash can be used to pay the premiums in the future, or withdrawn and used for other needs you may have.

If you can contribute the maximum premium, it is easier to achieve the long-term benefits of the policy. But if you think you might have a difficult time making the premium payments, you may want to consider other options. This type of policy can have surrender charges, meaning if you’re unable to keep that plan for a specified amount of time, there is a cost to cancel.

Universal life plans can be a great tool for long-term insurance needs as well as cash accumulation to help supplement long term goals.

Alternatives to universal life

If universal life insurance doesn’t fit your needs, you might look at these options:

  • Whole life insuranceoffers lifelong protection, builds cash value at a fixed rate and premiums stay the same for your entire life.
  • Term life insurance is cheaper, offers predictable premiums and provides protection for a temporary term, like 15 or 2o years. But it doesn’t offer cash growth.

Bottom line

Universal life insurance is a permanent policy that lets you adjust your premiums and coverage. But it’s expensive and involves more investment risk to build cash value than whole or term life policies.

To find the policy that fits your family’s needs, compare life insurance companies.

  1. “A Critical Review of Indexed Universal Life,” Witt Actuarial Services, April 2, 2020

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