How are the premiums managed in a Universal Life policy?

In a Universal Life policy, premiums are designed to offer significant flexibility, allowing policyholders to adjust their premium payments as their financial situations change. This feature enables individuals to pay varying amounts each month, as well as to increase or decrease their premium payments over time. This adaptability is particularly appealing to those whose income may fluctuate or who may wish to modify their investment contributions based on life circumstances.

Unlike policies with fixed premiums that require a set amount each period, Universal Life allows for a more tailored approach, whereby the policyholder can contribute more during financially stable months and less during tighter months. Furthermore, the excess contributions can accumulate in a cash value account, which grows based on interest rates and can be used for future needs, loans, or even to cover premium costs when necessary. This flexible nature is a key characteristic that distinguishes Universal Life policies from other types of life insurance.