Whole Life vs Universal Life Insurance | New York Life
what is the difference between whole life insurance and universal life insurance?
You are thinking about life insurance to protect your family. that’s great! The right policy can give you the peace of mind that your loved ones will be safe and able to maintain the life they’re used to should something happen to you.
We’ll be the first to admit that life insurance options can be confusing. there are different terms and options and opinions. don’t let that stop you.
While there are dozens of names and ways of offering different life insurance policies, almost all of them fall into three basic categories:
- term life covers a set period of time
- whole life offers guaranteed protection for life
- universal life offers a flexible long-term option
This article will cover the similarities and differences between whole life insurance and universal life insurance.
all life is permanent, while universal life offers long-term protection.
With whole life insurance, your premiums are fixed and guaranteed to never increase1. As long as you continue to pay them, you can count on life insurance benefits being paid to your beneficiaries. With universal life insurance there are no fixed premiums and you have more flexibility when making payments. however, if the policy is not properly funded, it could end. In addition, the cost of maintaining the policy can increase significantly as you age. keep that in mind when deciding which one is best for you.
whole life insurance offers more stability.
whole life has a guaranteed death benefit that will never decrease, as long as premiums are paid. your family will always get at least the amount you established in your policy. There is also the possibility that dividends will increase the amount of coverage over time. your premiums will never change either. for many, this reliability is the most important factor in their decision.
universal life insurance is more flexible.
Universal life insurance offers more control, but requires supervision and does not have a guaranteed death benefit. You can adjust your policy, and even your premiums (within limits), as your life changes. Without proper financing, your policy can potentially end as the death benefit is not guaranteed, but universal life insurance often gives you the longest-term protection for your money.
both can build cash value.
The cash value of a life insurance policy is an important way to save for the future, providing a safety net throughout life. You can borrow against your policy’s cash value to pay for unexpected expenses, allowing you to be better prepared for what’s ahead2. Whole life insurance offers a guaranteed cash value that accumulates over the life of the policy. Universal life insurance policies have the potential to build cash value, but it can fluctuate over time depending on how you finance the policy and other factors.
why choose whole life insurance?
Whole life insurance offers permanent, stable protection and access to cash value when you need it. is designed for someone who wants to “set it and forget it”, knowing that their loved ones will be protected when they pass away.
premiums are guaranteed never to increase.
Once you customize your policy with the benefits and premiums that fit your situation, you’re ready to go. you don’t have to do anything else, and you never have to worry about your cost going up or your benefits changing.
builds cash value.
With whole life, the cash value of your policy grows tax-deferred. this valuable asset can be used when you need it, for whatever you choose. it can cover unexpected medical costs, provide additional income in retirement, or even be used for a grandchild’s college tuition.
has growth potential through dividends.
Dividends provide an opportunity for your policy to grow larger over time. they can be used to pay premiums, increase cash value, or even be taken as cash. Dividends are not guaranteed, but New York Life has paid them every year since 1854.
related: explore whole life insurance
why choose universal life insurance?
Universal life insurance generally gives you the ability to fully customize your protection in advance and make adjustments in the future. is for those who want to be able to adapt their policy as life changes.
fits your needs now and in the future.
There are many ways to set up your universal life policy. you can design your coverage to last as little as fifteen years, for life, or somewhere in between. You can adjust your premium payments as your income fluctuates and even increase or decrease your death benefit as your needs change over time.
lower premiums than permanent life insurance.
universal life generally offers the most life insurance benefit for your dollar. This is mainly because the death benefit and cash value growth are not guaranteed, as they are in a lifetime.
related: exploring universal life insurance
which is better, whole life or universal life?
That will depend on your circumstances and wishes. If you’re still not sure which type of policy is best for you, it may help to talk to a financial services professional about the different ways insurance products and features can be combined. our experienced agents can guide you through your options and help you develop a personalized strategy based on your family’s needs.