Which of the following statements about universal life insurance is incorrect?

In the context of universal life insurance, policy loans are indeed permitted, making the statement about them not being allowed incorrect. Universal life insurance is designed with flexibility, allowing policyholders not only to adjust their premiums but also to access the policy's cash value through loans. When policyholders take a loan against the cash value, they do not have to repay it, but any outstanding loan amount will reduce the death benefit until it is repaid.

The other statements regarding universal life insurance accurately reflect its features. Premiums can indeed be adjusted, allowing for flexibility in premium payments. Cash values in these policies may grow at variable interest rates depending on the performance of the insurer's investments or other factors. Additionally, policyholders have the ability to alter the death benefit, which is a hallmark of universal life insurance, enabling them to adapt their coverage as their needs change. Understanding these features is crucial for recognizing the depth of flexibility and options available in universal life policies.