Whole vs. Universal Life Insurance | Bankrate (2024)

FAQs

Which is better, whole life or universal life insurance? ›

universal life insurance. Whole life and universal life insurance have many similarities, and both are great options to help protect your family. The main difference is that whole life usually doesn't change—many features are guaranteed for life—while universal life offers flexibility.

Universal policies typically don't have fixed interest rates, so they are less predictable than whole life insurance policies. If you miss a payment on a universal life policy or don't contribute enough to the cash value, you may end up making several large payments to keep the coverage.

A more complex product than term life insurance. Higher premiums than term life insurance. Could be costly if coverage lapses early.

With a whole life policy, the money from the cash value will grow at a fixed rate, making it simpler and more predictable than other permanent life insurance types. With a universal life policy, the cash value has an interest rate that's partially based on market conditions and will change over time.

Cons of Whole Life Insurance

Whole life is more expensive than term life, and you will receive a lower death benefit than you could get with the same amount of money with a term policy.

After all, someone can pass away at any age, and a life insurance death benefit (the payout beneficiaries get when you die) would help cover final expenses and other debts so they don't fall on loved ones. Life insurance for a 22-year-old is typically a better proposition than life insurance for a 55-year-old.

Just keep in mind that whole life insurance is quite expensive and often takes over a decade to earn reasonable investment returns. Therefore, it's typically only a good consideration if you're relatively young, have a high income and want to pass on money to your family.

Like whole life, a universal policy can provide lifetime protection while building cash value with tax advantages. UL also gives you the flexibility to raise or lower premiums within certain limits, so it can cost less than whole life coverage.

Can You Cash Out a Life Insurance Policy? With a cash value life insurance policy, like whole life or universal life insurance, you can access the cash value. One of the ways to do that is to cash out or surrender the policy. If you choose to cash out your policy, you'll receive the cash value minus any surrender fees.

A whole life insurance policy will begin building cash value as soon as you pay your first premium, and it will continue building throughout the life of the policy as long as there are funds in the account.

Is aflac good whole life insurance? ›

Aflac is a financially sound and competitively priced insurer that provides a wide range of term and whole life policies and riders, adding more flexibility for consumers.

Life insurance doesn't typically pay out in these circ*mstances: Murder: If your beneficiaries murder you or are closely tied to your murder, they won't receive the death benefit, per the slayer rule. Suicide: A payout won't apply if you commit suicide within the first two years of purchasing your policy.

Yes, you can convert a universal life insurance policy to a whole life insurance policy through a 1035 exchange, which allows you to transfer the cash value from one policy to another without incurring any tax consequences.

However, some plans reach maturity dates as early as age 85, meaning you could potentially be alive once the plan reaches its maturity date – especially as life expectancy continues to increase. If you are alive when your universal life insurance plan matures, generally you may receive a payment and the policy ends.

Term insurance is initially cheaper than other types of policies that offer the same amount of protection. Therefore, it gives you the greatest immediate coverage per dollar.

Whole life insurance is typically worth the cost for people between the ages of 25 and 50, even if you don't yet have a lot of people depending on your income or services.

Single premium whole or universal life insurance policies are the types that generate immediate cash value. However, you can also secure immediate life insurance coverage with a no exam term or whole life insurance policy.