How universal life policy pays out is through death benefit to beneficiaries and optional cash value access during lifetime. Universal life insurance, which is type of permanent life insurance with flexible premiums and adjustable death benefit, offered by insurers like Sun Life, Prudential, and others headquartered Canada and US, pays out in several ways. Upon death of insured, universal life pays death benefit to named beneficiaries, which can be Option A level death benefit where death benefit is face amount plus cash value or Option B increasing death benefit where death benefit is face amount plus cash value, with death benefit generally income tax free to beneficiaries under US and Canadian tax law if policy meets definitions. During lifetime, universal life pays out cash value through policy loans borrowing against cash value at interest, partial withdrawals reducing cash value and death benefit, and full surrender receiving cash surrender value minus surrender charges and loans. Universal life cash value grows tax deferred based on interest rate credited by insurer tied to market or fixed rate. So universal life policy pays out death benefit to beneficiaries upon death, plus cash value access via loans, withdrawals, or surrender during lifetime, with death benefit tax free and cash value tax deferred growth.
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