Life Insurance Policies: Whole vs. Universal

life insurance

They say, “What’s in the name?” When it comes to buying a life insurance policy, name is extremely important. Each one of us is different and so are our saving requirements. Before selecting a life insurance policy, you must analyze your personal and family requirements both pre and post your death. There are two different types of permanent life insurance. This article will help you understand more about these policies so that you can make a thoughtful decision.

Whole life insurance

This insurance covers you as long as you live. Here, you need to pay the same amount of premium for a specific time to receive death benefit. Usually, this policy is kept in force for your entire life, no matter for how long you may live. This type of insurance policy provides life insurance coverage with a savings feature. As a result, you may end-up paying higher premiums initially compared to term-life insurance.


With each premium payment, your cash value increases and this savings element of your policy builds-up your cash value on a tax-deferred basis. The presence of cash value in these policies is a real benefit because you can borrow against this cash value and also use it to pay the premium amount. Whole life insurance policy is made to fulfill an individual’s long-term goals and thus it is advisable to keep it in force for as long as you are alive.

Universal life insurance
This policy is also famous as an ‘adjustable insurance policy,’ because it offers more benefits than whole life insurance, and the policy owner has the ability to reduce or increase their death benefits and premium amount as per their financial needs (after first premium payment has been made).  When it comes to death benefit, the policy owner has two options – a fixed amount of death benefit, or increasing death benefit that is equal to the face value of the policy, plus, the cash value amount.

In case of financial issues, you may stop your premiums and use your cash value to pay the premium amount. However, there should be enough money accumulated in your cash value account to cover the payment of the premiums. The alternative of policy loan is another added perk in Universal life insurance. It is imperative that you do not make regular withdrawals from your accumulated fund because that will reduce the cash value amount.

While purchasing a particular type of life insurance policy, it is important to prioritize your requirements.

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