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Universal Life Insurance in India

TeamAckoApr 17, 2024

Universal life insurance is one of the most reliable and adaptable forms of coverage available today. It provides a blend of lifelong protection and cash value accumulation, making it an appealing choice for individuals and families seeking to safeguard their futures.

Universal Life Insurance





Flexible premiums

UL allows adjustment of payments if the situation changes.

High exposure to risk

Market fluctuations may affect the amount.

Potential cash value growth

Has an interest-bearing built-in cash value that increases over time.

Surrender Charges

If you choose to give up, you will have to pay a fee.

Flexible death benefits

Beneficiaries get a specific amount of money if the policyholder passes away.


Different features or elements, such as cash value accumulation, are involved. 

Tax-free benefits

Premiums and maturity amounts are tax-free.

Interest Rate Changes

Have variable interest rates that can change over time. 

What is Universal Life Insurance?

Universal Life Insurance is a type of life insurance policy that provides insurance coverage and an investment component. This means the policyholder will receive premiums returned at the end as a maturity sum and benefit from receiving the insurance amount in the event of their death. It is a long-term asset that gradually builds cash value, which can be accessed by the policyholder even during their lifetime.

Let's understand universal life insurance with the help of an example:

Suppose a policyholder is paying a yearly premium of INR 50,000. With time, the cash value is collected based on the interest rate and charges deducted by the insurance provider. If the policyholder increases the premium to INR 75,000 in a particular year, more funds are allocated to the cash value. 

Conversely, if they choose to reduce the premium to INR 25,000, the cash value growth may slow. The death benefit fluctuates accordingly. This flexibility allows people to adapt coverage and premiums to changing financial circumstances. 

How Does Universal Life Insurance Work?

When selecting this plan, your premium is divided into two main parts:

  • One for your life insurance account, and 

  • Other for your savings and investment allocations. 

This offers you the suppleness to arrange the amount of your premium payments according to your financial goals and timing. However, remember that a minimum premium must be paid to keep your policy in force.

This additional amount is loaded into your savings plan. Typically, interest is generated through this process, depending on the insurer. It's important to consider that it may be affected by changes in the market and economic conditions.

To maximise the benefits of your Universal life insurance, experts advise paying the maximum premium possible, especially during the initial years. This strategy helps in building a substantial cash value over time. This cash value can then be utilised to cover your premiums in the future, particularly during the later stages of your life.

3 Types of Universal Life Insurance

There are three main types of universal life insurance plans customised for the benefit of the people. They are: 

  1. Indexed Universal Life Insurance or IUL

  2. Guaranteed Universal Life Insurance

  3. Variable Universal Life Insurance or VUL

Indexed Universal Life Insurance or IUL

In this type of coverage, the cash value relies upon the market's overall performance. When the market is doing well, the cash value increases. However, if the market's performance declines, the value dwindles or reduces, affecting your premium rates.

Guaranteed Universal Life Insurance

This plan is less volatile than different types of permanent life insurance plans. This means the interest price is fixed, and the monthly or yearly premium rate quotes remain identical for the complete coverage length. The coverage remains effective as long as the premiums are paid on time. Guaranteed plans prioritise existence coverage and provide minimal cash-value construction.

Variable Universal Life Insurance or VUL

This type of plan invests a part of the cash value into a mutual fund, even providing existing coverage. The interest earned is based totally on the marketplace circumstance, making it riskier than Guaranteed Universal Life Insurance but doubtlessly more worthwhile. It's vital to observe that VUL policyholders are charged a fee for the investment issue.

Universal Life Insurance vs ACKO Life Flexi Term Plan

While universal life insurance offers lifetime coverage, ACKO Life Flexi Term Plan is known for its flexibility in meeting individuals' changing needs. It allows its policyholders to customise their coverage as per their preferences.

Basis of Comparison

Universal Life Insurance

ACKO Life Flexi Term Plan

Coverage Duration

Lifelong coverage until death.

Choose coverage duration as per needs.  You can extend or shorten your tenure according to your lifestyle, income, and financial dependents. 


While universal life insurance offers flexibility, higher premiums are often associated with policies that accumulate cash value.

Highly affordable premiums and extensive coverage for the chosen term. 

Cash Value

Builds cash value over time, which can be accessed or borrowed against.

No cash value accumulation


Allows flexibility in selecting the premium amount and frequency of premium payments.

Offers complete flexibility to modify coverage amount and payout options. 


Higher premiums due to cash value accumulation and investment components.

Highly affordable premiums 


Death benefit paid to the policyholder upon the policyholder's death.

Lump sum payout to beneficiaries upon the policyholder's death during the term.

Good For Individuals 

Seeking lifelong coverage and cash value accumulation.

Looking for financial protection for a specific term. 

Tax Benefits

Premiums paid in India against a universal life plan are tax-deductible, and payments received upon policyholder death are tax-free.

Both premium and payout are tax-free.

ACKO Life Flexi Term Plan

ACKO Life Flexi Term Plan is a highly flexible plan that delivers financial safety coverage to your near and dear ones. Key advantages include:

Adjustable Sum Assured

Flexible Plan Period

Flexible Payout Options 

Will Creation Service

Reasonable Premiums

Easy Claim Process

Yes, claims can be initiated online with the least amount of documentation. Because of ACKO's track record of prompt payouts, you can feel confident your loved ones will get the financial support they require without difficulty during a stressful time.

Universal Life Insurance Cash Value Growth

What is Cash Value?

Cash value is a portion of your insurance premium payment that earns interest over time. It can be borrowed through policy loans or withdrawals in urgent situations. 

How Does Cash Value Grow Over Time?

One of the most captivating aspects of universal life insurance is the building of monetary value. 

The interest the plan assembles, and the premiums you pay determine how much the policy's cash value escalates. Part of the money you pay as a premium goes toward the insurance cost and the unsettled amount is deposited into your cash value account.

  • Your universal life insurance policy's cash value can grow speedily if you pay more than the minimum amount necessary.

  • After paying the insurance premium and other associated costs, the excess premium payment is deposited into the cash value account.

  • Subsequently, the excess funds accrue interest, frequently at a rate determined by the insurer or associated with a particular market index, which may accelerate the buildup of financial value.

Remember that lending against or withdrawing from the cash value may result in tax implications and a reduction in the death benefit. Thus, to fully understand the specifics of your insurance, it is always advisable to speak with a financial adviser.

Determine Which Policy Works For You

Look at the table below to understand which plan works for you. 


Recommended Policy

Need flexible premiums

Universal Life Insurance 

Limited budget or temporary coverage needs

ACKO Life Flexi Term Plan

Optional Riders

ACKO Life Flexi Term Plan. Check out: ACKO Life Accidental Death Benefit Rider, ACKO Life Accidental Total Permanent Disability Benefit Rider, ACKO Life Critical Illness Benefit Rider

Guaranteed death benefit

Universal Life Insurance

Will creation services

ACKO Life Flexi Term Plan

Needs the flexibility to customise coverage

ACKO Life Flexi Term Plan

Seeking polished digital-first experience

ACKO Life Flexi Term Plan

How to Buy a Universal Life Insurance Policy?

The steps to buying a universal life insurance plan are as follows: 

  1. Research and read all the guidelines from different providers to discover one that fits your needs and budget.

  2. Contact a coverage agent or corporation consultant to discuss your options and get a quote.

  3. Fill out a form and go through the medical underwriting procedure, which includes assessing your fitness and lifestyle behaviour to decide the risk.

  4. Once authorised, evaluate the policy carefully before signing at the dotted line.

  5. Pay your premiums on time to keep your policy active and ensure your beneficiaries obtain the dying advantage upon passing.

Choosing the Right Universal Life Insurance Policy in India

Choosing the right Universal Life Insurance policy in India involves carefully considering various factors to ensure it aligns with your financial goals and needs.

  • Assess Your Financial Situation: Evaluate your financial status, including income, expenses, debts, and future financial obligations. This assessment will help determine the appropriate coverage amount and premium affordability.

  • Understand Policy Features: Familiarise yourself with the features of Universal Life Insurance policies available in India. These may include flexible premium payments, cash value accumulation, and adjustable death benefits. Understanding these features will help you make an informed decision.

  • Compare Policies: Research and compare different Universal Life Insurance policies offered by reputable insurers in India. Pay attention to premium rates, policy fees, investment options, and customer service reputation.

  • Analyse Policy Illustrations: Request policy illustrations from insurance providers to understand how the policy's cash value and death benefit may change over time based on various scenarios. Analysing these illustrations can help you assess the policy's long-term performance.

  • Consider Riders and Add-Ons:

  • Evaluate optional riders and add-ons offered with Universal Life Insurance policies, such as Accelerated Death Benefit Rider, Accidental Death Benefit Rider and more.

  • Determine whether these additional features meet your needs.

  • Check out ACKO Life Accidental Death Benefit Rider to get extra protection.

  • Seek Professional Advice: Consult a licensed insurance advisor or financial planner who can provide unbiased and personalised guidance based on your financial situation and goals. They can help you navigate through policy options and make a well-informed decision.

If you analyse insurance providers based on the above criteria, you will surely get the best plan for your near and dear ones. For help, you can contact a certified insurance advisor.

Factors Affecting Universal Life Insurance Premium

Below are some of the factors that can affect universal life insurance premiums: 

  •  Your age and fitness: Your premiums will likely be high if you're older or have health issues.

  • Coverage cost: This will rely upon your income, debts, and the dependents you have.

  • Premiums: Evaluate the correct premium. Determine if it aligns with your financial capability for the entire duration until maturity.

  • Cash cost accumulation: Determine how much cash value you want your plan to collect and how it will affect the premiums.

  • Investment alternatives: When selecting those options, consider your funding goals and risk tolerance.

  • Surrender costs: If you cancel your policy or withdraw cash value, you must pay surrender charges.

Understanding these key factors will help you make informed decisions. Moreover, if you need more clarification about calculating premiums, you can use an online calculator. 

Wrapping it up

Universal life coverage offers a unique blend of long-term coverage and savings components, making it a popular choice for those seeking flexibility and maximum cash value accumulation. One must understand that Universal life insurance involves higher premiums and investment risks. Therefore, be sure to carefully assess your needs before purchasing life coverage, and remember to consult with a financial advisor or insurance expert for guidance.

Frequently Asked Questions

Below are some of the frequently asked questions on Universal Life Insurance in India


What is universal life insurance?

Universal life insurance is a type of life insurance. It provides a blend of lifelong protection and cash value accumulation, making it an appealing choice for individuals and families seeking to safeguard their futures. 

Who should consider purchasing universal life insurance?

Individuals who want coverage for a lengthy period, flexibility, and a higher income can find this life coverage an appropriate option. It may also be a good option for those who have maxed out their contributions to other retirement accounts, such as 401(k)s or IRAs.

How does universal life insurance differ from term life insurance?

Term life coverage gives insurance for a selected period, while universal life insurance covers the policyholder's complete lifetime as long as premiums are paid.

Are there any additional riders available with universal life insurance?

Several riders, such as  Accelerated Death Benefit Rider, Accidental Death Benefit Rider and more, are available to enhance coverage.

What happens to the cash value of Universal Life Insurance if I cancel my policy?

If you cancel your Universal Life Insurance policy, you will receive the policy's cash value minus any surrender charges. However, keep in mind that surrendering your policy may have tax consequences.

How much Universal Life Insurance coverage do I need?

The amount of Universal Life Insurance coverage you need will depend on your circumstances, such as age, health, and financial situation. Speaking with a financial advisor to determine the appropriate coverage for your needs is recommended.

How often should I review my Universal Life Insurance policy?

It is recommended to review your Universal Life Insurance policy annually or whenever there is a significant change in your life circumstances, such as the birth of a child, a change in marital status, or a change in employment. This will help ensure your coverage and cash value accumulation goals align with your needs.

Is it possible to convert a Universal Life Insurance policy to another type of life insurance policy?

Yes, converting a Universal Life Insurance policy to another type of life insurance policy, such as Whole Life Insurance, is possible. This can be a good option if your needs and circumstances have changed and a different type of policy would better meet your needs.

Can the premiums for a Universal Life Insurance policy increase over time?

Yes, the premiums for a Universal Life Insurance policy can increase over time. This can happen if the cash value accumulation in the policy is not enough to cover the cost of the death benefit and administrative fees. It is important to monitor your policy regularly to ensure that your premiums are still affordable and the policy is still meeting your needs.

Can I change my Universal Life Insurance policy after it has been issued?

Yes, you can change your Universal Life Insurance policy after it has been issued, such as adjusting the death benefit or changing the premium payment schedule. However, any changes may be subject to fees or additional underwriting requirements.

Can I purchase Universal Life Insurance for someone else, such as a spouse or child?

You can purchase Universal Life Insurance for someone like a spouse or child. However, the insured person must provide consent and undergo underwriting to determine their eligibility for coverage.

Who is Universal Life Insurance best suited for?

Universal Life Insurance is best suited for individuals who want both a death benefit and a savings component in their life insurance policy. It may also be a good option for those who have maxed out their contributions to other retirement accounts, such as 401(k)s or IRAs.

What happens to the cash value of Universal Life Insurance if I cancel my policy?

If you cancel your Universal Life Insurance policy, you will receive the cash value of the policy minus any surrender charges. However, keep in mind that surrendering your policy may have tax consequences.

What is the difference between Universal Life Insurance and Whole Life Insurance?

The main difference between Universal Life Insurance and Whole Life Insurance is the flexibility in premium payments and death benefit options. Universal Life Insurance allows for more flexibility in both of these areas, while Whole Life Insurance has fixed premiums and death benefits.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes. 


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