What does the term "pure insurance" refer to in a universal life policy?

In the context of a universal life policy, "pure insurance" specifically refers to the portion of the premium that is allocated for risk coverage. This portion is used to provide a death benefit to the policyholder's beneficiaries in the event of the policyholder's death. Unlike whole life insurance, which includes a savings component, universal life policies offer flexibility in premium payments and the distribution between the insurance component and the cash value accumulation.

The concept of pure insurance highlights the risk element of the policy, distinguishing it from the cash value component that accumulates over time. This cash value can grow based on interest rates and can be accessed by the policyholder during their lifetime, but it is separate from the pure insurance coverage itself.

Understanding this distinction is crucial for policyholders, as it helps them manage their expectations regarding the benefits provided by their universal life insurance policy.