What is a characteristic of universal life insurance?

Universal life insurance is distinguished by its combination of a death benefit and an investment savings element, making it a flexible and adaptable insurance product. This structure allows policyholders to adjust their premium payments and the amount of the death benefit, resulting in a policy that can evolve to meet the changing financial needs of the insured over time.

The investment component typically accumulates cash value, which can grow at a variable interest rate, depending on the insurer’s performance. This dual function of providing insurance coverage while also allowing for potential cash value growth is a hallmark of universal life insurance, setting it apart from other types of life insurance that may not offer this level of flexibility or investment opportunity.

In contrast, other characteristics related to universal life insurance are less accurate; for example, stating that it only provides temporary coverage fails to recognize that it can provide lifelong coverage if premiums are maintained. The notion that it is exclusively for elderly individuals does not align with the policy's availability for people of various ages. Likewise, asserting that it requires higher premiums for younger age groups overlooks the fundamental design of universal life insurance, which typically allows individuals of all ages the option to invest based on their financial situation.