What kind of life insurance contract typically allows policyholders to adjust their premiums and death benefits?

Universal life insurance is designed with flexibility that allows policyholders to adjust their premiums and death benefits over time. This type of policy combines a death benefit with a cash value component, which earns interest based on current market rates. Policyholders can modify their premium payments within certain limits, as well as increase or decrease their death benefit amount, making it a dynamic insurance solution that can adapt to changing financial circumstances or needs.

This flexibility is a key feature that distinguishes universal life insurance from other types, such as whole life and term life insurance, which have more rigid structures. Whole life insurance typically requires fixed premium payments and provides a guaranteed death benefit, while term life insurance offers coverage for a specific period with no cash value accumulation and generally does not allow for premium adjustments or benefit changes during the term. Variable life insurance also includes flexible premiums, but it differs significantly due to its investment component, which is subject to market performance.