What Is The Definition Of Universal Whole Life Insurance?
Universal and whole life insurance policies are both types of permanent life insurance, providing lifetime coverage unlike term life insurance. While they share some similarities, there are key differences to consider when selecting a policy.
| Feature | Whole Life Insurance | Universal Life Insurance |
|---|---|---|
| Premium payments | Fixed | Flexible |
| Death benefits | Fixed | Adjustable |
| Savings element | Guaranteed cash value accumulation | Variable cash value accumulation |
| Risk | Low | Higher |
Whole life insurance offers consistency, with fixed premiums, guaranteed cash value accumulation, and death benefit. It is suitable for long-term responsibilities such as a dependent adult child’s care or post-death expenses like estate taxes. The savings element of the policy builds up your cash value on a tax-deferred basis, which can be partially withdrawn or borrowed against.
Universal life insurance, on the other hand, offers flexibility in premium payments, death benefits, and savings element. Policyholders can adjust the death benefit and premiums, and any interest earned on the investment account grows on a tax-deferred basis. The policy also allows partial withdrawals or borrowing against the cash value, but the interest rate is often dependent on market conditions and the policy carries higher risk compared to whole life insurance.
It’s important to discuss your financial situation and preferences with your insurance advisor to determine the right policy for you. Regardless of the type of policy, be sure to compare companies to get the best possible coverage. Other types of policies to consider include term life and indexed universal life insurance.
