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Understanding Universal Life Insurance

Universal life insurance, like whole life insurance, offers a permanent source of coverage throughout your life. However, the two types of policies differ in several ways. Learn more about these permanent life insurance policies and the unique ways in which they work.

What Is Universal Life Insurance and How Does It Work?

Universal life insurance is a form of permanent life insurance. Permanent life insurance policies, unlike term life insurance policies, do not have an expiration date. They remain in force for as long as you continue paying your premiums. If you die while your policy is in force, your beneficiaries will receive the policy’s death benefits.

Universal life insurance policies typically have several distinct characteristics:

  • You can adjust the premiums and benefits of your policy.
  • Any premiums you pay that cover more than the cost of the insurance itself is accumulated in a separate cash savings portion of the policy.
  • You may be able to pay premiums on the policy using interest earned on your accumulated savings.

What's the Difference Between Universal and Whole Life Insurance?

Whole life insurance is also a form of permanent insurance. Whole life policies typically aren't as flexible as universal life insurance policies.

Usually, with whole life insurance:

  • Your premiums stay constant throughout the life of your policy.
  • Your death benefits remain constant as well.
  • The policy accumulates cash value over time.
  • Benefits are paid out upon your death and can be used by beneficiaries to pay final expenses.
  • You may be able to secure a loan using your policy’s cash value as collateral.
  • The policy’s cash-value growth is tax deferred.

Neither of these two types of policies is objectively better than the other. Finding the right policy for you and your family will likely come down to your unique circumstances as well as your projected long-term needs.

*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.


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