While universal life insurance and whole life insurance are both kinds of permanent life insurance policies that can provide financial security for loved ones, they have several key differences. Universal life insurance may carry more flexibility, while whole life insurance comes with more stability. 

To find a permanent life insurance quote that works for a policyholder and their beneficiaries, it's important to understand the differences between these two policies. Here's how universal and whole life insurance work so policyholders can decide which type of plan fits their needs. 

How does universal life insurance work?

Universal life insurance is a permanent life policy that will last the entirety of a policyholder's lifetime. Just like many permanent life insurance plans, the premium payments the policyholder makes will go toward both the death benefit and cash value growth component. The cash value's growth can depend on the current interest rate that shifts with market conditions. Once the policyholder has built up enough cash value, they can borrow against or withdraw from it as needed. 

One important element of universal life policies is that they allow the policyholder to adjust their premium payments, as well as how much of these payments go toward the policy's cash value. These changes will also affect the policy's death benefit amount. 

How does whole life insurance work?

Like universal life insurance, whole life insurance does not expire until the policyholder passes away as long as they continue to pay premiums. This type of plan can also accrue cash value, but policyholders cannot adjust the premium payments and cash value like they can with universal life policies. This means whole life insurance policies can be more expensive than many universal life policies, although the high amount of cash value policyholders can receive may make the higher cost worth it.

Universal life insurance vs. whole life insurance

The biggest difference between universal life insurance policies and whole life insurance policies is the ability for universal life holders to adjust the amount of their premium payments, death benefits, and accrued cash value. Keep in mind that the flexibility of universal life coverage means the interest rates for the policy's cash value could rise or fall, so the policyholder may not accrue as much as they would with whole life insurance. 

On the other hand, whole life policies offer more stability with fixed premiums, although payments may be higher. Additionally, the interest rates for the cash value component will remain stable as time goes on. While policyholders can't adjust their premium payments and cash value, the cash value growth will stay consistent despite shifting market conditions.

Which type of life insurance should policyholders choose?

Every life insurance customer has different needs. To figure out what life insurance quote and coverage is best, it's wise to assess financial goals and compare them with the features and benefits of each insurance policy.

Customers with potentially shifting finances may want a more flexible policy that still offers the opportunity to grow cash value. In this case, universal life insurance may be the right choice for the policyholder. And customers in need of life insurance coverage with guaranteed cash value growth may want to consider getting whole life insurance. As long as the policyholder can properly manage higher premium payments, a whole life policy will remain a viable option.

Find the right life insurance coverage

Choosing the right life insurance policy will require customers to research options and figure out what type of coverage may best fit their financial goals. Universal and whole life insurance policies can benefit policyholders in different ways, so the right choice depends on their unique situation. Once the policyholder finds a life insurance plan that aligns with their needs, they can have peace of mind knowing their beneficiaries will have financial security in the event of their passing.

For all media inquiries, contact: 

Laura Zimmerman, Chief Marketing Officer

laura.zimmerman@fidelitylife.com, (312) 288-0068