The Downside of Universal Life—Easy to Fix if you Stay Aware

Universal life now accounts for 40% of life insurance sales.
It's a leading choice because:

Your universal life plan will let you adjust your benefits if your needs change.

The value of a universal life policy can be used as collateral for a non-taxable loan.

Universal life offers you the flexibility to pay either a smaller or larger premium - depending on your circumstances. This can be an important feature if your household income fluctuates.

The Downside of Universal Life:

If your premiums stay too small for too long, your policy could lapse and leave you without life insurance protection.

If your insurance carrier doesn't manage its investments well or the market produces a lower return than anticipated, the return on the cash value portion of your policy will suffer - though it will never dip below a minimum interest rate guaranteed by your contract.

If the amount being made on the invested value goes down, you'll have to pay a higher premium as your plan ages.

While it may be desirable to make financial decisions and then move on, you must monitor any market-based financial asset you own. Universal life is market-based in that the cash value of the policy grows based on market performance. If the cash value earns a lower rate than projected, you could get a very irritating call one day that in order to keep your policy in force, you need to send in an extra check. Avoid that call by obtaining and annual "in force ledger."
To evaluate a cash value policy, have the most recent policy statement (mailed to you annually), the original ledger illustration that was prepared when the policy was purchased (part of your contract or original policy), and an in-force ledger illustration, which shows past performance and projected future performance. You get the in-force ledger from your insurance agent. The insurance agent can run the in-force illustration dividends or credited interest at both current and guaranteed rates. Compare the original illustration to the current in-force ledger for both the guaranteed amounts and the current rates. Does the current ledger show that your policy is keeping up with the original projection? If not, ask why.
Most quality agents will volunteer or recommend this review process on a regular basis-at least every two years or even annually. If you have a universal life policy that has never been reviewed, get that done.