March 1, 2024

How Does Universal Life Insurance Work?

In selecting a life insurance policy, you may have heard the term “universal life insurance” here and there. A popular form of life insurance, universal life insurance may offer some advantages for your circumstances. By understanding how universal life insurance works and what makes it distinct from other types of life insurance, you’ll be better able to navigate your choices in life insurance policies.

What is Universal Life Insurance?

Let’s start with a brief breakdown of what makes universal life insurance distinct from other forms of life insurance:

  • Universal life insurance is a type of permanent life insurance
  • Universal life insurance offers cash value that can be accessed for any purpose
  • Universal life insurance policies offer income-tax-free death benefits
  • Premiums and benefits are flexible

So what does all that mean?

These policies are a type of permanent life insurance, meaning that as long as you pay enough premiums, coverage is in place until the insured passes away*. While like all life insurance policies, universal life insurance offers death benefits–a cash payout upon the death of the policyholder–it also holds cash value. This means that if enough premiums are paid, the money you pay (minus the monthly deductions) adds cash value to the account that accrues interest at a rate set by your insurance provider; that rate can fluctuate over time, but will never earn less than the guaranteed interest rate of the policy. Universal life policies’ cash value carries higher risk and potentially more fees but can also offer greater accumulation potential. These funds can be withdrawn and used for any purpose during the life of your policy**. As part of their financial advantages, universal life insurance policy death benefits are income-tax-free for beneficiaries. Finally, universal life insurance policies are flexible and can be tailored to meet your needs: your premium payment amount can be flexible, and you can overpay your premiums up to a set limit to increase the value of your policy; your policy may allow you to increase or decrease the death benefit; and you can access the cash value of your policy. In combination, these attributes make universal life insurance policies a popular and versatile choice in life insurance. 

Advantages of BetterLife Universal Life Insurance 

Now that we’ve discussed how universal life insurance works, let’s look at the potential advantages of a BetterLife universal life insurance policy. At BetterLife, our universal life insurance policies and customer service are adaptable to your circumstances: 

  • BetterLife offers Universal-Single and Universal-Joint Life Insurance policies, which cover either one or two people
  • Your life insurance policy stays with you, even if you move, change jobs, or encounter another life change
  • Premiums can be automatically withdrawn from your bank account for convenience 
  • A variety of riders may be added to a policy, for extra protection that meets your needs.


In addition, BetterLife is a member-owned and member-focused company, meaning that we offer additional protection and security for our members as well as our trademark customer service. We also offer additional Member Benefits, which can help you deal with some of life’s unforeseen contingencies and unexpected issues.

BetterLife strives to offer industry-leaning options for insurance, and your membership may just be a phone call away. Get in touch today and we’ll connect you with an agent who can answer your questions and help get things started.

According to tax laws IRC Sections 101 & 7702.

*For premiums to be enough, they must cover the cost of the monthly deduction (administrative fees + cost of insurance), which can change over time. A policy can become underfunded and lapse if there are not enough funds in the contract value to pay the monthly deductions.

**Cash values can be accessed through loans and/or withdrawals, but these will reduce the death benefit. In addition, withdrawals from some policies may be subject to surrender charges and could have a permanent effect on cash values and death benefit. 

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