Traditional whole life insurance, unlike term insurance, combines a death benefit with a savings element, known as the policy's cash value. When you die, the insurer pays the death benefit tax-free to your beneficiaries. Death benefits are usually guaranteed to age 100. At that time, the cash value of the policy would be equal to the death benefit, allowing you to cash out at that value. Guarantees are strongest with whole life policies, but premiums are highest.
Universal life is a variation of whole life that offers greater flexibility.
It allows you to specify how much and how often to pay premiums, and to increase or decrease the death benefit depending on your changing needs. Like whole life, universal life gains cash value at an interest rate declared periodically by the insurer. As the cash value accumulates, you can arrange to have premiums deducted from the cash value of the policy instead of paying them out of pocket. The policy will remain in force as long as the cash value can cover the monthly cost of the insurance. Unlike whole life, you can withdraw cash value from the policy in exchange for lowering the death benefit.