Life insurance comes in many varieties, and there’s always going to be a debate about which policy is right for you and your individual circumstances. Nowhere is that more clear than in the faceoff between universal life insurance and whole life insurance policies.
While both of these policy types fall under the larger umbrella of permanent life insurance, there are enough distinctions between them to be of note. Today, we’re going to take a look at both whole and universal life policies, and delve into what distinguishes the two.
Whole Life Insurance
The first thing to note about whole life insurance is that it has a fixed premium. This means that you will pay the same amount every single year for your coverage, until your policy ends. Your whole life insurance policy will cover you for your entire life, with no regard for how long that life might be, as long as you keep paying that fixed premium.
Whole life insurance provides a potential method of accumulating cash value over time. Cash value, in insurance terminology, is a monetary amount that you might borrow against when it grows large enough. Your insurer will generally take part of your premium payments and use these in a high-interest bank account or an investment account.
Over time, that cash value can grow, and you’ll have combined your life insurance coverage with a nice savings that you can use while you’re still alive.
What’s more, it’s important to remember that with a whole life insurance policy, you’ll be paying premiums for a set period of time and your beneficiaries are still guaranteed to receive your death benefit should you pass away. You should consider getting help from Valley Financial for life insurance.
Universal Life Insurance
Now, in a universal life insurance policy, you’ll often have a flexible premium as opposed to a fixed one. This means that instead of paying the same amount year after year for your policy, you’ll have the chance to adjust your premium payments within a set minimum and maximum value. Additionally, you can reduce or increase your death benefits with a universal life insurance policy, within certain limitations.
A portion of the payments you make to your universal life insurance go into an investment account, from which interest accrued will be credited back to your policy. This increases cash value, which you can then use to augment your premiums, among other things.
The most immediate difference between whole and universal life insurance policies is the distinction between fixed rate and flexible premiums. You’ll also want to note that how you pay interest is different as well, since universal life insurance is usually adjusted monthly, whereas whole life is adjusted annually.
These, and other, intricacies provide the two types of policies with their own benefits and drawbacks, so you’ll want to weigh the options carefully before you decide if whole life or universal life insurance is better for you.