Universal vs. Whole Life Insurance


Whole life insurance is a type of permanent life insurance policy that covers you for your entire life. Like universal life insurance, this type of policy combines the death benefit associated with term life policies with an additional savings component. Unlike universal life insurance, whole life policies have fixed monthly premiums, with a certain portion going toward your death benefit and the rest going toward your accumulated cash value. Whole life insurance policies often have more expensive premiums than universal life, although both are significantly more expensive than term life insurance. 

“A universal life plan has an adjustable cash value, and the premium can be adjustable,” says David Lewis, a certified financial planner and president of Montlake Capital Management in Texas. This means that if you lose some income in any given month, you have the option of making only your minimum payments and not the full amount. On the other hand, if you have some extra cash, you can put it towards your insurance premiums. Compared to whole life insurance, this feature of universal life insurance offers greater flexibility.

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