Finding a life insurance policy that fits your and your family’s needs can be challenging. There are many options available to you, including two of the most common forms of life insurance: universal life insurance and whole life insurance. While both policies have their similarities, they’re also very different from one another. This guide will help you compare and contrast the two and help you identify the policy that’s right for you.
What Is Universal Life Insurance?
Universal life insurance is commonly referred to as adjustable life insurance because of its flexibility. You can increase or reduce the death benefits that your beneficiaries receive. You can also pay your premiums whenever you want at any amount.
Keep in mind, however, that making lower payments is only possible if you have money in your cash value account to cover the difference. Interest will build up over time on the money in your cash value account, which increases how much value the account has.
By obtaining universal life insurance, you can customize the coverage you receive while also making further adjustments later on. If you want a life insurance policy that’s adaptable to the changes in your life like marriage, divorce, adoption, or the birth of a child, universal life insurance may be the way to go.
This type of life insurance can give you coverage for 15 years at the minimum or your entire lifetime if needed. While many universal life insurance policies are permanent, obtaining a policy that lasts for just 15 or 20 years means that your premiums should be lower when compared to permanent life insurance.
What is Whole Life Insurance?
Whole life insurance is designed to cover you for the remainder of your life. This policy will provide coverage as long as you continue making your premium payments. A core feature of this insurance is that it effectively combines your coverage with savings. A portion of your monthly payment is placed into a high-interest investment or bank account, which means your cash value will rise as you make payments.
Whole life insurance allows you to benefit from permanent protection while giving you access to cash value as needed. Whole life insurance is a great option if you want to be confident that your loved ones will be provided for when you die. You should also know that premiums never increase.
As mentioned earlier, the cash value that your policy has will increase over time. The cash in your account can be used to pay for anything, including retirement income or medical costs.
The Bottom Line
Universal life insurance allows you to customize many aspects of the policy to your needs and preferences. You can even choose to have the policy last for just 15 years or your entire lifetime. Whole life insurance automatically lasts until you pass away.
Both policies allow you to increase the cash value you have access to. The ultimate choice between the two policies is yours, but if you’re unsure which direction to go, it’s always best to speak to an insurance agent to get your questions answered to help make your decision easier.