Universal life insurance is one of the most reliable and adaptable forms of coverage available today. It provides a blend of lifelong protection and cash value accumulation, making it an appealing choice for individuals and families seeking to safeguard their futures.
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Universal Life Insurance is a type of life insurance policy that provides insurance coverage and an investment component. This means the policyholder will receive premiums returned at the end as a maturity sum and benefit from receiving the insurance amount in the event of their death. It is a long-term asset that gradually builds cash value, which can be accessed by the policyholder even during their lifetime.
Let's understand universal life insurance with the help of an example:
Suppose a policyholder is paying a yearly premium of INR 50,000. With time, the cash value is collected based on the interest rate and charges deducted by the insurance provider. If the policyholder increases the premium to INR 75,000 in a particular year, more funds are allocated to the cash value.
Conversely, if they choose to reduce the premium to INR 25,000, the cash value growth may slow. The death benefit fluctuates accordingly. This flexibility allows people to adapt coverage and premiums to changing financial circumstances.
| Pros | Cons |
| Flexible premiumsUL allows adjustment of payments if the situation changes. | High exposure to riskMarket fluctuations may affect the amount. |
| Potential cash value growthHas an interest-bearing built-in cash value that increases over time. | Surrender ChargesIf you choose to give up, you will have to pay a fee. |
| Flexible death benefitsBeneficiaries get a specific amount of money if the policyholder passes away. | ComplexityDifferent features or elements, such as cash value accumulation, are involved. |
| Tax-free benefitsPremiums and maturity amounts are tax-free. | Interest Rate ChangesHave variable interest rates that can change over time. |
When selecting this plan, your premium is divided into two main parts:
One for your life insurance account, and
Other for your savings and investment allocations.
This offers you the suppleness to arrange the amount of your premium payments according to your financial goals and timing. However, remember that a minimum premium must be paid to keep your policy in force.
This additional amount is loaded into your savings plan. Typically, interest is generated through this process, depending on the insurer. It's important to consider that it may be affected by changes in the market and economic conditions.
To maximise the benefits of your Universal life insurance, experts advise paying the maximum premium possible, especially during the initial years. This strategy helps in building a substantial cash value over time. This cash value can then be utilised to cover your premiums in the future, particularly during the later stages of your life.
There are three main types of universal life insurance plans customised for the benefit of the people. They are:
In this type of coverage, the cash value relies upon the market's overall performance. When the market is doing well, the cash value increases. However, if the market's performance declines, the value dwindles or reduces, affecting your premium rates.
This plan is less volatile than different types of permanent life insurance plans. This means the interest price is fixed, and the monthly or yearly premium rate quotes remain identical for the complete coverage length. The coverage remains effective as long as the premiums are paid on time. Guaranteed plans prioritise existence coverage and provide minimal cash-value construction.
This type of plan invests a part of the cash value into a mutual fund, even providing existing coverage. The interest earned is based totally on the marketplace circumstance, making it riskier than Guaranteed Universal Life Insurance but doubtlessly more worthwhile. It's vital to observe that VUL policyholders are charged a fee for the investment issue.
While universal life insurance offers lifetime coverage, ACKO Life Flexi Term Plan is known for its flexibility in meeting individuals' changing needs. It allows its policyholders to customise their coverage as per their preferences.
| Basis of Comparison | Universal Life Insurance | ACKO Life Flexi Term Plan |
| Coverage Duration | Lifelong coverage until death. | Choose coverage duration as per needs. You can extend or shorten your tenure according to your lifestyle, income, and financial dependents. |
| Premiums | While universal life insurance offers flexibility, higher premiums are often associated with policies that accumulate cash value. | Highly affordable premiums and extensive coverage for the chosen term. |
| Cash Value | Builds cash value over time, which can be accessed or borrowed against. | No cash value accumulation |
| Flexibility | Allows flexibility in selecting the premium amount and frequency of premium payments. | Offers complete flexibility to modify coverage amount and payout options. |
| Costs | Higher premiums due to cash value accumulation and investment components. | Highly affordable premiums |
| Payout | Death benefit paid to the policyholder upon the policyholder's death. | Lump sum payout to beneficiaries upon the policyholder's death during the term. |
| Good For Individuals | Seeking lifelong coverage and cash value accumulation. | Looking for financial protection for a specific term. |
| Tax Benefits | Premiums paid in India against a universal life plan are tax-deductible, and payments received upon policyholder death are tax-free. | Both premium and payout are tax-free. |
ACKO Life Flexi Term Plan is a highly flexible plan that delivers financial safety coverage to your near and dear ones. Key advantages include:
| Adjustable Sum Assured | Flexible Plan Period | Flexible Payout Options |
| Will Creation Service | Reasonable Premiums | Easy Claim Process |
Cash value is a portion of your insurance premium payment that earns interest over time. It can be borrowed through policy loans or withdrawals in urgent situations.
One of the most captivating aspects of universal life insurance is the building of monetary value.
The interest the plan assembles, and the premiums you pay determine how much the policy's cash value escalates. Part of the money you pay as a premium goes toward the insurance cost and the unsettled amount is deposited into your cash value account.
Your universal life insurance policy's cash value can grow speedily if you pay more than the minimum amount necessary.
After paying the insurance premium and other associated costs, the excess premium payment is deposited into the cash value account.
Subsequently, the excess funds accrue interest, frequently at a rate determined by the insurer or associated with a particular market index, which may accelerate the buildup of financial value.
Remember that lending against or withdrawing from the cash value may result in tax implications and a reduction in the death benefit. Thus, to fully understand the specifics of your insurance, it is always advisable to speak with a financial adviser.
Look at the table below to understand which plan works for you.
| Situation | Recommended Policy |
| Need flexible premiums | Universal Life Insurance |
| Limited budget or temporary coverage needs | ACKO Life Flexi Term Plan |
| Optional Riders | ACKO Life Flexi Term Plan. Check out: ACKO Life Accidental Death Benefit Rider, ACKO Life Accidental Total Permanent Disability Benefit Rider, ACKO Life Critical Illness Benefit Rider |
| Guaranteed death benefit | Universal Life Insurance |
| Will creation services | ACKO Life Flexi Term Plan |
| Needs the flexibility to customise coverage | ACKO Life Flexi Term Plan |
| Seeking polished digital-first experience | ACKO Life Flexi Term Plan |
The steps to buying a universal life insurance plan are as follows:
Choosing the right Universal Life Insurance policy in India involves carefully considering various factors to ensure it aligns with your financial goals and needs.
Evaluate your financial status, including income, expenses, debts, and future financial obligations. This assessment will help determine the appropriate coverage amount and premium affordability.
Familiarise yourself with the features of Universal Life Insurance policies available in India. These may include flexible premium payments, cash value accumulation, and adjustable death benefits. Understanding these features will help you make an informed decision.
Research and compare different Universal Life Insurance policies offered by reputable insurers in India. Pay attention to premium rates, policy fees, investment options, and customer service reputation.
Request policy illustrations from insurance providers to understand how the policy's cash value and death benefit may change over time based on various scenarios. Analysing these illustrations can help you assess the policy's long-term performance.
Evaluate optional riders and add-ons offered with Universal Life Insurance policies, such as Accelerated Death Benefit Rider, Accidental Death Benefit Rider and more.
Determine whether these additional features meet your needs.
Check out ACKO Life Accidental Death Benefit Rider to get extra protection.
Consult a licensed insurance advisor or financial planner who can provide unbiased and personalised guidance based on your financial situation and goals. They can help you navigate through policy options and make a well-informed decision.
If you analyse insurance providers based on the above criteria, you will surely get the best plan for your near and dear ones. For help, you can contact a certified insurance advisor.
Below are some of the factors that can affect universal life insurance premiums:
Your premiums will likely be high if you're older or have health issues.
This will rely upon your income, debts, and the dependents you have.
Evaluate the correct premium. Determine if it aligns with your financial capability for the entire duration until maturity.
Determine how much cash value you want your plan to collect and how it will affect the premiums.
When selecting those options, consider your funding goals and risk tolerance.
If you cancel your policy or withdraw cash value, you must pay surrender charges.
Understanding these key factors will help you make informed decisions. Moreover, if you need more clarification about calculating premiums, you can use an online calculator.
While universal life insurance policies offer lifelong coverage and cash value accumulation, term life insurance provides affordable protection for a specified period, making it a good option for those who seek temporary, high-coverage options. Policies such as the best term insurance plan for 1 crore provide extensive financial protection for a defined period of time with affordable premiums.
If you’re considering purchasing a term plan, it's always recommended that you use a term insurance plan calculator to estimate the proper coverage and premiums within your budget. This helpful tool gathers your basic details, such as age, income, desired sum assured, policy term, riders, and more, to provide accurate information for smart decision-making.
Universal life coverage offers a unique blend of long-term coverage and savings components, making it a popular choice for those seeking flexibility and maximum cash value accumulation. One must understand that Universal life insurance involves higher premiums and investment risks. Therefore, be sure to carefully assess your needs before purchasing life coverage, and remember to consult with a financial advisor or insurance expert for guidance.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
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