A California Universal Life Insurance policy is considered a permanent life policy. The UL policy options provide more flexibility than whole life insurance. Policyholders have the flexibility to adjust their premiums and death benefits. California Universal Life Insurance premiums consist of two components: a cost of insurance (COI) amount, and a saving component, known as the cash value.
Much like a savings account, a California Universal Life Insurance policy can accumulate cash value. With a universal life insurance policy, the cash value earns interest based on the current market or minimum interest rate, whichever is greater. As cash value accumulates, policyholders may access a portion of the cash value via a loan without affecting the guaranteed death benefit. A policyholder will pay taxes on any withdrawals they make from the excess cash value they don’t repay from the loan of the California Universal Life Insurance policy. Also, depending on when the policy and premium payments are made, earnings will be available as either last-in-first-out (LIFO) or first-in-first-out (FIFO) funds.