Because of the fees and higher premiums, universal life insurance will usually cost you about four times more than a standard term policy.
Cost of insurance
When it comes to premiums, there are two types of universal life policies: LCOI and yearly renewable term.
LCOI, or level cost of insurance, is where the insurance company calculates the total cost to insure you and makes the premiums level — they never change throughout the life of the policy.
Yearly renewable term is similar to buying a new term life insurance policy every year, so the cost of insurance gradually increases. This method allows for lower overall cost during the early years, but coverage becomes more expensive the longer the policy continues.
Repayment of loans
Borrowing against your universal life policy could lower your death benefit, and you’ll be charged interest.
Monitoring cash value
Most universal life insurance policies are not “set and forget” policies. Indexed universal life insurance and variable universal life insurance are meant for people who have some knowledge of investing, as the overall performance of the cash value of these policies needs to be monitored closely.
Super-low interest rates
The interest rates on most universal life insurance policies are extremely conservative (2-3%) and may not even offset inflation. You won’t get rich by owning a universal life insurance policy.