Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.



What is Universal Life


Fixed Universal Life Insurance

Universal life insurance (UL) was introduced in 1979. ULs were unique because they offered policy owners flexibility in premium payments and how the death benefit was structured. Values in the policy could earn current interest, backed by a base guaranteed rate. In contrast to whole life insurance policies that offer a guaranteed death benefit with guaranteed policy value for a guaranteed premium and very little flexibility. Policy performance is based on “Current assumptions.” The performance of the policy depends on the current non-guaranteed interest rate and the current non-guaranteed charges. If interest rates drop or charges increase, policy owners might have to pay more premiums in order to keep the policy in force.

As these policies became more popular, Insurance Companies created newer versions to give their clients even more flexibility and options.

Index Universal Life Insurance

Index Universal Life Insurance (IUL) is a cash value policy that offers death benefit protection for your beneficiaries as well as a cash value component. The cash value component gains are tied to an index (i.e., SP500). When the index performs well, your cash value will increase. When the index performs poorly, your policy will not gain any cash value but will not lose any cash value. There is a ceiling with your gains, but there is also a hard floor as well, so you won’t lose money in down market years. Borrowing money against your policy will not trigger a taxable event. When structured properly, IULs give you a great savings vehicle for a tax-free retirement with a lot of upside and very little downside risk.

Variable Universal Life Insurance

Variable Universal Life (VUL) provides even more flexibility than Index Universal Life. Instead of tying your cash value to an Index, you can invest your cash value directly in mutual funds. VULs have more potential upside than IULs but also have more risk. Unlike with IULs, you can lose your cash value in down market years.

Key Terms:


  • Insured

    The person who the life insurance protection is on.

  • Beneficiary

    The person or people who will receive the benefit amount if the insured were to die.

  • Policy Owner

    The person who owns the life insurance policy. This can be the insured, the beneficiary, or a third party like a trust.

  • Life Insurance Company

    The companies which issue life insurance policies.

  • Policy

    The contract between the policy owner and the insurance company which lays out the terms of the agreement.

  • In Force

    Your policy is active and you are now covered.

  • Face Amount

    The amount of money paid to the beneficiary if the insured were to die. Also, know as the benefit amount or death benefit.

  • Premium Payment

    The amount of money paid by the policy owner to the insurance company to keep the policy in force.