What is the primary characteristic of universal life insurance?

Universal life insurance is primarily characterized by its combination of insurance and investment features. This type of policy allows policyholders to not only obtain a death benefit but also to accumulate cash value based on a portion of the premiums paid. The cash value can grow over time, often linked to a selected interest rate or investment account.

This flexibility is a significant distinction from other types of life insurance, such as term life insurance, which provides only a death benefit and does not accrue cash value. Universal life insurance also allows policyholders to adjust their premiums and death benefits within certain limits, providing both flexibility and potential for growth.

Other options, such as term policies, which are straightforward and provide coverage for a specific period without an investment component, and policies that emphasize fixed premiums without investment options, do not capture the essence of universal life insurance. Additionally, the option that mentions lifelong coverage without investment risk somewhat reflects aspects of whole life policies rather than universal life, which introduces investment risks alongside the insurance component.