Universal Variable

What Does Universal Variable Mean?

A universal variable, also known as variable universal life insurance, is a life insurance policy that provides both a death benefit and an investment component. The investment portion is allocated to a separate account, where it can be used for stocks or bonds, while the death benefit remains guaranteed.

Insuranceopedia Explains Universal Variable

Like any other life insurance policy, a universal variable policy provides a death benefit to the policyholder. What sets it apart from standard life insurance is its investment feature. A portion of the premium is allocated to a separate account, allowing the policyholder to invest in securities such as stocks and bonds of their choice. In the United States, earnings from these investments are tax-deferred. It is a subcategory of universal life insurance, which also allows flexible premiums but does not always include the same investment options.

However, the policy carries an inherent risk: investments may not generate positive returns. In such cases, the policy might not accumulate any cash value. Not all permanent life insurance policies carry this same level of risk, so buyers who want guaranteed cash value growth should compare their options. You can learn more about which types of life insurance generate immediate cash value.