What Is Universal Life Insurance? (2025 Guide)

Universal life insurance offers lifetime coverage, adjustable premiums and cash value growth, but it requires monitoring to stay on track.

Find out if you're overpaying for life insurance below.

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What Is Universal Life Insurance? (2025 Guide)

Written by Mark Fitzpatrick

Updated: December 8, 2025

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Key Takeaways

Universal life insurance allows you to adjust premiums and coverage amounts over time, making it more flexible than whole life.

The policy's cash value can grow based on market performance, but poor returns may require higher out-of-pocket payments later.

Unlike term life, universal life offers permanent coverage that works best for people who want long-term protection and are comfortable actively managing cash value to cover rising insurance costs.

What is a Universal Life Insurance Policy?

Universal life insurance is a type of permanent life insurance that combines lifelong coverage with flexible premiums and a tax-deferred savings component.

This type of life insurance splits your premium payments into two parts.

Cost of Insurance (COI): This covers the life insurance costs, including mortality charges, administrative fees and other expenses for your death benefit.
Cash Value Component: The remaining amount goes into a cash value account, which earns interest based on the insurer's investment strategy, using stable vehicles like bonds. Depending on your policy terms, this account grows, and you can borrow against it or make withdrawals.

Cash value growth is not guaranteed and depends on market performance and interest rates. Poor investment performance requires higher premium payments to maintain coverage.

Universal Life Insurance Policy: Key Characteristics

Universal life insurance offers unique flexibility compared to other permanent life insurance types. Key features include:

Flexible Premiums

You can adjust how much you pay. Increase premiums to grow cash value or reduce payments when money's tight.

This flexibility isn't available in traditional whole life policies.

Adjustable Death Benefit

Coverage amounts can be increased or decreased (with insurer approval), letting you update your policy as your needs change.

Learn more: Adjustable Life Insurance.

Investment Component

Part of your premium goes into a cash value account that grows based on market performance. This means you see gains or losses depending on how your funds are managed.

UNIVERSAL LIFE POLICY MANAGEMENT

Review annually to evaluate policy performance against original illustrations, adjust premiums based on cash value growth and costs, update beneficiaries after major life changes and monitor your insurance company's financial strength ratings. Contact your agent or a fee-only financial advisor if policy performance falls behind projections.

Automatic payments and regular check-ins with your insurer or advisor can keep your coverage secure over the long term.

How Much Is Universal Life Insurance?

The table below highlights average rates for different ages and coverage levels.

Data filtered by:


$100,000	$6	$71
$250,000	$15	$177
$500,000	$30	$353
$750,000	$44	$530
$1,000,000	$59	$707
$1,500,000	$89	$1,060
$2,500,000	$148	$1,767

The life insurance costs above are based on average quotes for buyers with average weight and health ratings. Actual rates will vary depending on your profile, lifestyle, health, location and insurer underwriting guidelines.

UNIVERSAL LIFE INSURANCE COST: RELEVANT FACTORS

Universal life insurance costs more than term life (and often more than whole life) because it combines lifelong coverage with an investment component. But unlike whole life, your premiums are flexible and change over time based on how your policy performs. Several personal and policy-level factors influence the cost of a universal life policy, including age, health, death benefit amount and policy features.

Types of Universal Life Insurance

Universal life insurance comes in several variations, each offering different levels of flexibility, risk and guarantees. The right choice depends on your financial goals, investment knowledge and how much oversight you're willing to maintain.


Traditional (Non-Guaranteed) UL	Basic and lower-cost option with flexible premiums and adjustable death benefits. No guarantees, so the policy can lapse if underfunded.	Medium	Fixed interest rates based on insurer’s portfolio	Budget-conscious buyers who can actively monitor their policy
No-Lapse Guaranteed UL (GUL)	Provides permanent coverage with a no-lapse guarantee as long as required premiums are paid. Minimal cash value growth.	Low	Minimal to none	Estate planning, mortgage protection, or buyers prioritizing guaranteed coverage
Indexed UL (IUL)	Links cash value growth to a market index (e.g., S&P 500) with a guaranteed minimum return and capped gains.	Medium	Market-linked with downside protection and capped upside	Retirement planning, tax-advantaged savings, moderate risk tolerance
Variable UL (VUL)	Allows direct investment in sub-accounts like stocks and bonds. Offers highest growth potential but also the highest risk.	High	Direct market performance, potential for large gains or losses	Experienced investors, high-net-worth individuals comfortable with risk

CALCULATE YOUR COVERAGE NEEDS

Before shopping for universal life insurance, determine how much coverage your family needs and how long you'll need it. Use income replacement (multiply annual income by 10 to 12 years), debt coverage (mortgage, loans, credit cards) and future expenses (children's education, final costs) to calculate your total need. Universal life works best when you need coverage for decades, not just temporary protection. Try our life insurance calculator to quickly assess your coverage needs and get sample quotes.

Universal Life Coverage: Bottom Line

Universal life insurance combines permanent coverage with flexible premiums and an investment component. It gives policyholders more control than whole life but also introduces more complexity and risk.

This type of policy works well if you want long-term protection and are comfortable managing cash value performance over time. Before buying, make sure the potential benefits align with your financial goals and your willingness to monitor and adjust your policy as needed.

Universal Life Insurance Explained: FAQ

Have questions about universal life insurance? We've got answers.

Do universal life insurance premiums increase with age?

Universal life insurance premiums increase with age if the cash value doesn't adequately cover the policy's costs, requiring higher premiums to maintain the desired death benefit.

Can you cash out a universal life insurance policy?

You can cash out a universal life policy by surrendering it, which lets you access the accumulated cash value.

Surrendering the policy terminates the death benefit, and there may be fees or tax implications. Consider consulting with a financial professional before taking this step.

What happens to the cash value in a universal life policy when the policyholder dies?

When the policyholder of a universal life policy dies, the insurance company absorbs the cash value, and the beneficiaries receive the agreed-upon death benefit. The cash value itself does not get passed on to the beneficiaries unless specific provisions are made within the policy.

Can you lose money in a universal life insurance policy?

Universal life insurance cash value is tied to interest rates or market performance. If returns are low or fees outweigh gains, your account balance shrinks. Poor performance or underfunded premiums force higher payments to keep the policy active, or it lapses altogether.

What is the difference between whole life and universal life insurance?

The key difference between whole life and universal life lies in flexibility; universal life insurance offers adjustable premiums and death benefits, whereas whole life insurance has fixed premiums and guaranteed cash value growth.

What's the difference between universal life insurance and term life insurance?

Term life insurance offers affordable coverage for a set period (like 10 or 20 years) with fixed premiums and no cash value. Universal life insurance provides lifetime coverage with flexible premiums and builds cash value you can borrow against, though it costs more and requires active management.

Learn more: Term vs. Universal Life Insurance

Who should get universal life insurance?

Universal life insurance works well for those who want lifelong coverage with flexibility in premiums and potential investment growth. It suits young couples building cash value early, business owners seeking investment growth, sole financial providers needing premium flexibility, people with significant debts who want adjustable coverage and stay-at-home parents whose household contributions would be costly to replace.

Our Methodology

Universal life insurance requires comparing flexibility, not just price. We gathered and reviewed 248,399 life insurance quotes to determine average rates across ages.

Why This Approach Works for Universal Life

Unlike term life insurance with fixed premiums, universal life policies let you adjust death benefits and premium payments over time. This flexibility makes comparing policies more complex: you're not just looking at price but at how each insurer structures cash value accumulation, minimum premium requirements and policy loan options.

We analyzed pricing trends and policy structures across the complete dataset to identify which insurers offer genuine flexibility without hidden restrictions that force higher premiums later or reduce your death benefit unexpectedly.

What Our Data Reveals

All quotes were updated in 2025 to reflect current pricing. While your quote depends on factors like age, health and coverage amount, our analysis reveals consistent patterns in how insurers price universal life policies and structure their features.

This research helps you understand which companies deliver competitive rates, which offer the strongest financial ratings to support lifelong coverage and which provide policy features that give you useful control over your premiums and death benefit as your needs change over decades.

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

He writes about economics and insurance, breaking down complex topics so people know what they're buying.

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