What characterizes a universal life policy?

A universal life policy is characterized by its combination of investment savings with life insurance protection. This type of policy is designed to offer both the flexibility in premium payments and the opportunity to accumulate cash value over time. The policyholder can adjust the premium and death benefit amounts within certain limits, allowing for customization based on changing needs.

Unlike term insurance, which provides coverage for a specified period without any cash value accumulation, universal life insurance creates a cash value component that can grow based on interest rates or investment performance. This dual nature of providing insurance coverage while also serving as a savings vehicle is what sets universal life policies apart from other types of life insurance.

The other options do not accurately describe the characteristics of a universal life policy. Term insurance is strictly for a limited period and does not have a cash value. Universal life policies do require premium payments, though they offer flexibility in how those payments can be made. Lastly, universal life insurance is not restricted to a specific period; it can provide lifetime coverage as long as premium payments are maintained.