Universal life is permanent coverage that can cover long term risk, with accountability, and some flexibility, particularly if excess premiums are paid. LCOI (Level Cost of Insurance) is a fixed insurance cost method available with most universal life policies. With LCOI, the level monthly charges for the insurance are payable to age 100 when the coverage becomes paid up.
Traditional universal life policies stay in force for life provided the monthly charges are covered.
Premiums are flexible. Typically, only the Cost of Insurance needs to be covered, but you can also pay more to invest in the tax deferred fund of the policy.
Provided you pay more than the minimum premiums, cash value begins to build in the tax deferred fund of the policy, allowing for premium holidays, because the insurer deducts monthly insurance charges from the fund.
Traditional universal life policies typically include a selection of investment options, and a small number include a smoothed return account option.
A small number of traditional universal life products include a Guaranteed cash surrender value when certain options are selected at the time of purchase.
Some traditional universal life policies offer an option to underwrite a second life when the single life policy is being issued, to guarantee that a switch can be made in the future, from Single to Joint Last to Die coverage, regardless of the health of the added insured at the time of the switch. Some of those policies also include a contractual right to switch from Single to Joint Last to Die, but rates and availability are based on the health and lifestyle of the insured at the time of the switch.
Under most traditional universal life policies, in the case of a major disability, you can access the balance of the tax deferred fund in your policy without any tax implications.
Traditional universal life policies offer a variety of investment options, but none of which include a guaranteed fixed monthly return for life.
Premiums are a fair bit more than term policies initially, but with Level Cost of Insurance (LCOI), those costs stay the same for life. Over time, the cost of renewing a term policy will become more expensive than universal life premiums.