Whole vs Universal Life Insurance

Both whole insurance and universal life insurance are considered permanent types of life insurance coverage. Both of them have some unique features and benefits that you should be aware of. Here are the basics of whole vs universal life insurance and how each one of them works.


One of the major areas in which these 2 types of policies differ is in your premium payments. With whole life insurance, you are going to make the same premium payment over a long period of time. This provides you with a consistent bill for your life insurance coverage. With universal life insurance, you have much more flexibility with your payments. With the initial payment of a universal life policy, you are going to have to pay a certain amount. After that point, you will be able to alter your payment and the frequency in which you pay. There will be a minimum payment that you have to make, but above that amount you do not have restrictions. You will be able to pay any amount that you want and make your payments at anytime that you want.

This means that you are having a bad month financially, you can make a smaller premium payment with universal life insurance. With universal life insurance, you could even choose to stop making payments completely for a certain period of time. During this time period, the money for your minimum payment would come out of the cash value of the policy.

Death Benefit

Another key difference between these 2 types of policies is in the way that the death benefit is addressed. With whole life insurance, you are going to have a fixed death benefit. This means that over the course of the entire policy, the death benefit will remain constant. With a universal life insurance policy, your death benefit can fluctuate. At your discretion, you can actually increase or decrease the amount of death benefit that is associated with your policy. You could choose to utilize a fixed death benefit or you could have a death benefit that increases over time. This allows you to customize the policy to your unique needs.

Cash Balance

With both of these types of accounts, you are going to accumulate a cash balance as you make your premium payments. With whole life insurance, a certain part of each premium payment will go towards funding a cash account. This money will earn interest through investments that are chosen by the insurance company. You can borrow against this cash balance or even surrender the policy and take the cash balance in the future.

With the universal life insurance policy, you will also be building up a cash amount. With this type of account, the interest that is accrued will be applied as cash to your policy. This means that depending on how well your investments do, it is going to impact the amount of premiums that you owe.