Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. Universal life insurance addresses the perceived disadvantages of whole life in that the premiums are flexible. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates or the financial markets.

A universal life insurance policy includes a cash-value account where interest is paid (credited) on the account at a rate specified by the company. Normally, these plans are less expensive than Whole Life.