Universal Term Life Insurance

Universal term life insurance is the unlikely hybrid of term life insurance and universal life insurance, two seemingly incompatible policies.

How it’s term insurance

The policy lasts only for a term of one year, but at the end of the term, it is renewable.  What this means is that you can perpetuate the policy by renewing it indefinitely.  However, premiums increase at the time of renewal, to reflect the insured’s increased age.

How it’s universal insurance

Universal term contains a cash value component.  As is the case in ordinary universal insurance, your premium is variable: you pay how much you choose, whenever you choose.  Your cost of insurance and your death benefit are determined in part by the amount of cash value you have shored up.

For greater detail, see “Cash value in universal life insurance” and “Flexibility in universal life insurance.”