Which of the following best describes a universal life insurance policy?

A universal life insurance policy is best described as combining term insurance with investment elements. This type of insurance features both a death benefit component and a cash value component that accumulates over time. Policyholders have the flexibility to adjust their premium payments and can even change the death benefit amount, which allows for a combination of protection and investment growth.

The investment portion typically earns interest at a rate determined by the insurance company, and the policyholder can potentially borrow against the cash value. This flexibility and the dual nature of coverage and investment distinguish universal life insurance from other policy types, such as whole life insurance, which has fixed premiums and guaranteed cash value growth.

In contrast, the assertion that premiums are fixed and cannot be adjusted inaccurately characterizes the nature of universal life insurance, as it is designed to offer premium flexibility. The idea that premiums must be paid annually is also misleading, since universal life policies allow for different payment schedules. Finally, stating that the death benefit is always set at a minimum fails to capture the policy's inherent flexibility, as policyholders can modify the death benefit amount, within certain limits, to meet their changing needs.