Which of these statements regarding universal life insurance is INCORRECT?

Universal life insurance is designed to offer policyholders a significant degree of flexibility, which includes the ability to vary premium payments. This flexibility allows policyholders to adjust their payments based on their current financial situation, making universal life particularly appealing.

Policy loans are indeed permitted within universal life insurance policies. This feature allows policyholders to take out loans against the cash value of the policy, providing access to funds if needed, though it’s important to remember that outstanding loans may reduce the death benefit.

Furthermore, a key advantage of universal life insurance is that interest on the cash value component accumulates on a tax-deferred basis. This means that the cash value grows without being taxed until it is withdrawn or the policy is surrendered, making it an attractive feature for those looking to save.

The statement that policy loans are not permitted is incorrect. Universal life policies typically allow for loans, providing a significant financial benefit to the policyholder. Thus, the accurate choice in identifying the incorrect statement about universal life insurance is that policy loans are not permitted.