What are the features of universal life insurance?

• A. Fixed premiums, fixed death benefit, no cash value.
• B. Death benefit is fixed and independent of cash value.
• C. Flexible premiums, a flexible death benefit, and a cash value that earns credited interest.
• D. The policy guarantees a fixed return on cash value.

Answer: (C)

Universal life insurance is defined by three main features: flexible premiums, a flexible death benefit, and a cash value that earns credited interest. Premium flexibility means you can adjust the amounts you pay over time, even skipping or varying payments, as long as the policy has enough funds to cover ongoing charges and the cost of insurance. The death benefit can be tailored—it isn’t fixed in all cases and can be kept level or increased by using the cash value or choosing different death benefit options. The cash value grows because the insurer credits interest to it, often with a guaranteed minimum, but the credited rate can vary with market conditions and policy performance. This combination—premium flexibility, adjustable death benefit, and a cash value that earns interest—defines universal life and distinguishes it from policies with fixed premiums and benefits or those without a cash value.