Universal Life

You decide how much you want to put in over and above a minimum premium. The insurance company chooses the investment vehicle, which is generally restricted to bonds and mortgages. The investment and the returns go into a cash-value account, which you can use against premiums or allow to build.

• With some policies, sometimes called Type I or Type A, the cash account goes toward the face value of the policy on the death of the policyholder.
• With a second variety, sometimes called Type II or Type B, the beneficiary receives the face value of the policy plus all or most of the cash account.
• While Type II is meant to provide a partial hedge against inflation, it demands higher premiums as you get older than Type I.

A variation of a universal policy, often called universal variable life, allows policyholders to choose investment vehicles.