Universal life insurance, on the surface, sounds like a great option, and it really can be. However, there are things you should know before you choose a universal life insurance policy over a whole life policy. We’re breaking down the pros and cons to help you make an informed decision.

At The Huneycutt Group, we help people across North Carolina understand their life insurance options and choose coverage that protects what matters most.

What Is Universal Life Insurance?

Universal life insurance is a type of permanent life insurance that offers lifelong protection along with a cash value component that earns interest over time.

Unlike whole life insurance or term life insurance, a universal life insurance policy keeps your coverage in place for your entire life as long as minimum premium payments are met. It also offers flexible premiums, a flexible death benefit, and the ability to build cash for future needs.

People choose universal life when they want a life insurance policy that adapts as they move through life. You can adjust coverage, pay premiums on your own schedule within certain limits, and watch the policy’s cash value grow at a minimum interest rate set by the issuing insurance company.Talk with a local advisor who will put your goals first. Contact The Huneycutt Group today.

How Universal Life Insurance Works

Here is how universal life insurance works in simple, practical terms. You make premium payments. Part of those premiums goes toward the cost of insurance and policy expenses, and the rest goes into a cash value account that can grow over time. The cash value can be used for policy loans, premium payments, or withdrawals, but using it reduces the policy’s available value and can reduce the death benefit.

The cash value component gives you room to breathe. If you hit a tight month, you can use positive cash in the policy to maintain coverage. If you want your life policy to grow faster, you can pay higher premiums. The goal is to help you accumulate cash while keeping lifelong protection in place.

Important note: Universal life can provide coverage for your lifetime, but it is not “set it and forget it.” If premiums are too low, credited interest is lower than illustrated, or charges increase with age, the cash value can shrink and the policy can lapse unless policy funding is adjusted. Cash value can help you get through a tight month, but repeated use to cover charges accelerates depletion and increases lapse risk, which is why regular policy reviews and on‑time payments matter.

Loans and withdrawals from the policy may have tax consequences if the policy is surrendered or lapses with a gain, and if the policy is classified as a Modified Endowment Contract (MEC), different tax rules apply to distributions. A financial professional and tax advisor can help you understand how loans, withdrawals, and MEC rules apply to your situation before you access cash value.

Universal Life Insurance Options We Help You Explore

Different types of universal life exist, and each one fits a different plan.

Standard Universal Life

A universal life policy that offers flexible premiums, a guaranteed death benefit, and steady cash value growth. It is designed for predictable coverage and long term stability.

Indexed Universal Life Insurance

Indexed universal life insurance ties potential cash value growth to a stock market index. Your earnings vary but your policy still carries a minimum interest rate. This is a good fit for people who want growth potential without full exposure to the stock market.

Variable Universal Life Insurance

Variable universal life insurance lets you invest the policy’s cash in options like mutual funds. Because the investment portion can rise or fall, earnings vary. This works best for someone comfortable with market risk. A registered broker dealer usually handles the investment advisory services tied to variable universal life.

Survivorship Universal Life

Survivorship universal life covers two people and pays the death benefit after both insured persons pass. It is often used to plan for estate taxes, preserve assets, or support long term financial goals.

Custom Universal Life

If you need a custom universal life solution that blends flexible premiums, guaranteed cash accumulation, and adjustable coverage, we can help design a plan that fits your entire life.

Why People Choose Universal Life

A universal life insurance policy offers advantages you will not find in every insurance policy, along with responsibilities to keep it properly funded over time. Many people like that UL combines permanent coverage with flexibility, but long‑term stability depends on how the policy is structured, how it performs, and whether premiums are kept at appropriate levels.​

• Permanent coverage you can shape: You can adjust the death benefit and premiums within policy limits, but significant reductions in funding or long stretches of minimum premiums may require higher payments later to keep coverage in force.​
• A death benefit that protects your family: The policy can provide income tax‑free death benefits to your beneficiaries, but loans, withdrawals, and missed premiums can reduce or jeopardize that benefit.​
• Cash value for future needs: Cash value can be accessed for things like college tuition, emergencies, or opportunities, subject to policy limits, potential surrender charges, and tax rules.​
• Living benefits and riders: Some policies include or offer riders that let you accelerate benefits during serious illness or add guarantees, but these features vary by company and often come with conditions and extra cost.​
• Tax advantages with rules: Cash value generally grows tax‑deferred and death benefits are typically income tax‑free, but loans, withdrawals, Modified Endowment Contract (MEC) status, and policy lapse can create unexpected tax bills if not managed carefully.​

Some universal life contracts include no‑lapse guarantee provisions that can keep coverage in force if specific premium requirements are met, even when cash value is low, but those guarantees are conditional and can be lost if payments are late or insufficient.

Working with an advisor to review the policy regularly helps you use flexibility wisely while protecting the long‑term death benefit your family is counting on.​

Why Work With The Huneycutt Group

At The Huneycutt Group, we work with respected insurance company partners known for their support when it matters most.

We help you compare universal life, whole life, term life, and all other life insurance coverage so you can make a clear decision. Whether you want simple lifelong protection or a policy designed to build cash for future plans, we help to guide you from start to finish.

Ready to explore universal life insurance with a team you can trust.

Connect with The Huneycutt Group.

Common Questions About Universal Life Insurance