Among all the types of life insurance out there, everyone eventually has to settle on one that they know they will be happy with for the next few years or even the rest of their lives. So, the question for many becomes: is universal life insurance the right choice for me? Here are some of the pros and cons of universal life insurance:

First, remember that universal life insurance is a form of coverage that allows a person to control how much of their money goes into benefits and how much goes into a cash portion that acts as a kind of savings account that a person can access at any time.

Pro – The biggest advantage to having universal life insurance is the level to which a person has control over it, permitting a great deal of investment and the ability to grow those premiums into a healthy little nest egg.

Pro – It permits a person to have extra cash on hand, if they need it. With the cash component of the coverage accessible to the owner of the policy, they are able to use it for a down payment on a house or anything else they like.

Pro –It usually has a guaranteed minimum death benefit. That is to say that, even if a person doesn’t wisely use some of the money in the plan, there is usually a point where they can’t spend anymore, because of the minimum guaranteed benefit. This acts like a kind of a safety net for those adventurous investors.

Pro – Premiums are flexible. This is great for people who need an insurance policy that can fit the needs of a fluctuating budget. For the good times, one can pay higher premiums than they need to and they can even pay lower premiums when their budgets are tight. For those lean times, they are also permitted to skip the occasional one.

Con –The ability to tinker with this form of insurance can also be its Achilles’ Heel if left under the purview of those who might not make wise decisions. One could potentially find the insurance claim reduced all the way down to its barebones in a short period of time.

Con – The cash access component to universal life coverage can also have some negative repercussions if it’s not handled well. A universal life insurance policy, if treated too much like a savings account can have its owner find that it’s not worth very much years later if they’re constantly borrowing from it.

Con – There is some risk involved. For those who prefer to have something that can’t be altered and is one hundred percent guaranteed, this is probably not the plan for them.

Con – Meeting the basics really only meets the minimums for the premiums which means that if the policy is never given more than the most basic payments, then it never has the chance to accrue any major growth in cash value.

Overall, universal life insurance is a good bet for those who like control over their plan and tend to be risk-takers. Those who want stability in their plan should probably look for something else.


By Genaro Martin

Linda Martin: Linda, a renowned management consultant, offers strategies for leadership, team building, and performance management in her blog.