Remember that doing so will eat up your cash value – if there isn't enough, you will need to make up the difference, or your policy will lapse.
Universal life insurance (UL) is one of two types of permanent insurance. The other is whole-life insurance. A universal policy, like real life, can provide lifetime protection and build cash value with tax benefits. UL allows you to increase or decrease your premiums within certain limits so that it may cost less than full coverage. It does not offer the same guarantees as whole life. If you pay too few premiums, it could impact your cash value and reduce the amount of your death benefit.
As you keep paying your premiums on your universal life insurance policy, you'll experience cash value growth over time. Depending on the insurer and the policy you ultimately go with, you may need to pay one upfront premium payment or a fixed monthly premium.
Whole-life policies guarantee that premiums, cash values growth, and death benefits will not change. All these aspects are made flexible by UL. Cash value growth can be affected by the amount you pay for premiums. Cash value growth is affected by how much you use. This will impact the amount that your family receives after you are gone. It can lead to policy lapse. Keep in touch with your financial professional so they can ensure that your policy continues to meet all your needs.
Policyholders have certain flexibility compared to other types of permanent life insurance policies in that you can lower your premium payments or change your death benefit amount. Plus, the cash value component offers more potential to earn more interest – on the flip side, the value can go down over time.
Keep in mind that it will affect your cash value. If yours isn't, you will need the rest to replace your policy.
More specifically, the cash value component earns interest based on a money market rate of interest or, for some types of universal policies, a rate tied to a market index. Whatever you make will increase your cash value, helping you pay your premium. Lowering your monthly payments can be helpful if your financial situation changes.