Universal life insurance is similar to a whole life policy but it has an investment element attached. There is also some flexibility in the policy as premiums and the death benefit payable can be varied as your circumstances change. Premium payments made in excess of the cost of insurance are invested. Interest is paid on this investment and added to the cash value attached to the policy. There is also usually a guaranteed minimum rate of interest ( usually 4%) fixed by the insurer, so the investment is as safe as it can be.

Flexibility is a major advantage with a universal life insurance policy, particularly for families who may find they have fluctuations in their ability to pay premiums. On the downside, if premium payments are too low for a long period, the policy could lapse leaving the holder without insurance protection. It is important to talk to an experienced professional advisor when considering your life insurance needs.