Finance and Credit Professional

Life insurance can be bought in many forms and universal life is one of those forms. Universal life insurance is a permanent type of insurance that is based on a cash value. With this type of insurance, the insurer pays a somewhat higher premium than he or she would with a term life policy. A portion of that higher premium is used to pay for the life insurance itself and the remainder is placed into an investment portfolio.

Premiums are usually paid monthly and that portion that is used as investment is credited, with interest to the policyholder's account. The portion that is used to pay for the insurance itself is deducted from the total amount that is sent in. This is known as the COI or Cost of Insurance portion. In the event no payment is sent in for a month, the amount of the COI is deducted from the cash amount in the account.

The amount of interest that will be credited to the account is determined by the insurer. In many cases, this will be determined by a financial index of some type. Because only the amount of interest credited and not the cash value itself varies, universal life policies offer a stable investment option for some consumers.

It should be noted that there is a similar type of policy that was designed from aspects of the universal life policies and that is called the Variable Universal Life (VUL) insurance policy. VUL policies allow the cash value to be directed to a number of separate accounts that operate like mutual funds and can be invested in stock or bond investments with greater risk and potential reward.

Lastly, there are the Equity Indexed Universal Life policies that work by investing in Index Options such as the S

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