Universal Life Insurance

A financial cushion to help those who depend on you, with flexible coverage and premiums.

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Universal life insurance — like all life insurance — is there to help you support your loved ones’ financial future in case you’re not there to provide for them yourself. As your needs and priorities change, a universal life insurance policy lets you adjust your coverage and premiums, too, within policy limits.1

What is universal life insurance?

Universal life insurance is a type of permanent life insurance. It is designed to last your lifetime2 and to help you provide support for your beneficiaries after you die. It comes with more flexibility than whole life insurance, because you can change the premium you want to pay, the timing of your payments and your death benefit while your policy is in effect. 

Key features of a universal life insurance policy

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Flexible premiums

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Ability to accumulate cash value that earns interest, generally tax-deferred3

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You can access the cash value during your lifetime for any reason, generally income-tax free4

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Your policy lasts your lifetime (as long as sufficient premiums are paid)

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Your policy pays your beneficiaries a lump sum that is generally tax-free, known as the death benefit

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You can choose whether the death benefit is a fixed amount or increases with your policy’s cash value

How does universal life insurance work?

When you make a premium payment on a universal life policy, most of that payment is allocated to your policy’s cash value. The cost of keeping the policy in force is subtracted from that cash value every month. The length of time you choose to pay your premiums — and the amount you pay — determines how much cash value your policy can accumulate. You may be able to increase the death benefit, and you may be able to lower or even stop your premium payments in the future if the policy has accumulated sufficient cash value. Read more about how life insurance works.

How much does a universal life insurance policy cost?

The monthly cost of keeping a universal life policy in force depends, in part, on

  • your age (as you get older, the cost of insurance goes up), your health, whether you smoke
  • the size of the death benefit you want. You choose how much premium to pay, within contract limits.

You can choose to pay more than the policy costs today and build cash value that can help cover the cost of the policy later. If you have sufficient cash value already, you can choose to pay less than the cost of the policy or even not pay for a while.

Who is universal life insurance best for?

Because universal life insurance offers flexibility — to change premiums or the amount of coverage — it may be a good option to consider if you want coverage to last the duration of your life. It might also be useful if you have big, long-term savings goals and you need both life insurance and an accumulation vehicle to meet them.

What types of universal life insurance does Farmers New World Life Insurance Company offer?

Universal life insurance includes various policy types that let you choose how you want your cash value to earn interest. 

Farmers EssentialLife® Universal Life5 pays a defined interest rate. The policy contract guarantees a minimum rate, but the company can pay a higher rate based on favorable market conditions. The interest rate can vary over time but never goes below the guaranteed minimum rate.

Farmers Index Universal Life®6 allows you to allocate part of your premium in accounts indexed to the S&P 500® or S&P MARC 5 ER® market indexes7. You can choose either or both to help you grow your cash value, with growth potential tied to a market index. Unlike investing directly in the stock market, the Farmers Index Universal Life policy guarantees a zero percent floor that may help you protect your assets from market-related losses in years when indexes perform poorly.

This indexed arrangement offers the potential for more rapid growth with the protection of the floor, but it may be a little more unpredictable than Farmers EssentialLife Universal Life.

What are some differences between universal life insurance and whole life insurance?

Both are permanent life insurance, meaning they are designed to last your whole lifetime, as long as premiums are maintained. But they differ in key ways.

Universal life insurance

Whole life insurance

Permanent — provides
lifetime coverage

Permanent — provides
lifetime coverage


Premiums are flexible. You can choose each month to pay the minimum or pay more. May be able to lower or stop paying in the future if cash value is sufficient. 

Premiums are guaranteed to be level and don’t change for the life of the policy.


Death benefit is flexible. You can increase it, with underwriting approval, or reduce it. You can also choose whether the death benefit is a fixed amount or increases by the amount of your cash value.

Death benefit is stable and guaranteed based on premiums. You choose your coverage amount when you buy your policy. You can surrender part of your policy if you no longer need all of it, but adding more coverage requires a new policy.


Cash value builds based on either a predictable fixed rate or options tied to a market index. Can be used to keep premiums from rising with age. Can be used during your lifetime for any reason.

Cash value builds at a guaranteed rate with each month’s premium. Can be used during your lifetime for any reason.


Does universal life insurance have flexible premiums?

Yes. Flexible premiums are a key feature of universal life insurance policies. Each month, you can pay the minimum or you can choose to pay more, up to IRS limits. You may also choose to skip a payment or even stop paying premiums in the future if your policy has enough cash value to cover its costs. Paying more than the minimum premium allows your policy to build more cash value over time. If you pay less, your policy stays in force as long as you have enough cash value to cover the current charges, but your coverage may not stay in place for your entire lifetime.

Does universal life insurance have flexible death benefits?

Yes. Universal life insurance has flexible death benefits, within the limits of your contract. You can change the amount of coverage (your death benefit) by adding more coverage or reducing coverage if the remaining policy still meets minimum policy-size requirements.

Learn From Experience

More questions about life insurance? Get answers here.

What Should I Know Before Buying Life Insurance?

Life insurance can be a tricky topic. Here are answers to some common questions we hear about life insurance.

What Factors Drive Life Insurance Calculations?

The first number customers usually want to look at is the amount of coverage. This is the biggest question for most customers.

What Are Living Benefits on a Life Insurance Policy?

Both term and permanent life insurance offer “riders” that could potentially provide payments while you’re alive.

 

¹ The cost to keep your policy in force will increase over time. This policy may lapse if you do not pay enough premiums to continue coverage.

² Lifetime coverage (or life of the policy) is guaranteed as long as all premiums are paid to keep the policy in force.

³ Farmers® companies, employees, agents, and representatives do not provide legal or tax advice. In general, partial or full surrenders from a permanent life insurance policy in excess of the policy’s basis are taxable. Limited circumstances exist where death proceeds will be taxable. This material has been prepared for general informational purposes only, and is not intended to provide and should not be relied on for tax, legal or financial advice. Because each individual’s situation is different, specific advice should be tailored to your particular circumstances; you should always consult your own tax, legal and other advisors before engaging in any transaction. This material reflects our general understanding of current law as of the date hereof, but tax laws and IRS administrative positions may change. This material is not intended to and cannot be used to avoid any Internal Revenue Service penalties. We specifically disclaim any liability resulting from the use or application of information contained in this publication. Farmers New World Life is not affiliated with or endorsed by any government agency.

⁴ Cash values may be accessible through policy loans. Policy loans that are not repaid and partial surrenders will reduce cash surrender value and death benefit. Policy loans are subject to interest charges. If your policy is a modified endowment contract, loans and surrenders may incur taxes and penalties.

Distributions from a life insurance policy in the character of partial or full surrenders up to basis or policy loans will generally be income tax free, provided the policy does not violate Modified Endowment Contract (MEC) guidelines and the policy is not terminated during the lifetime of the insured.  MEC guidelines are rules in the Internal Revenue Code which specify maximum premiums that can be paid without triggering adverse tax consequences for surrenders. A policy termination during the life of the insured can cause the owner a single taxable event for any gains in the policy that were borrowed or withdrawn on or before the termination date.

⁵ Policy form ICC18-FEUL or applicable state variation.

⁶ Policy form ICC22-FIUL or applicable state variation. Not available in California – ask your agent about the indexed universal life product available in your state. Not available in Florida or South Carolina.

⁷ The “S&P 500 Index” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Farmers New World Life Insurance Company. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Farmers Index Universal Life is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

The “S&P MARC 5% ER Index” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Farmers New World Life Insurance Company.  Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Farmers Index Universal Life is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P MARC 5% ER Index.

 

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