Universal and Variable Life Insurance

In the 1970's, the life insurance industry developed some new kinds of life insurance. These new kinds include universal life insurance and variable life insurance.

Universal life insurance may offer better investment returns than traditional life insurance policies. Interest rates on a universal policy's cash value are competitive with money market funds and money market accounts.

Universal life insurance also allows policyholders to adjust their coverage to meet changing economic or personal conditions. For example, policyholders can change the proportion of term life insurance and whole life insurance in a policy. They can also increase or decrease the face value of the policy, raise or lower the premiums they pay, and shorten or lengthen the premium-paying period.

Variable life insurance policies are supported by investments, usually in the stock market. The face value and cash value of variable life insurance policies vary according to the performance of the investments.

Usually a minimum face value or death benefit is guaranteed regardless of how the stocks perform. Many companies offer universal variable life insurance, which combines features of universal life insurance and variable life insurance.