Whole Life Versus Universal Life: Which One Is For You?

Joseph Meyer
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Whole Life

Insurance vs. Universal Life Insurance: Which is Better for You?

If you just bought a new home or you want to be sure that your family will be taken care of in the event of your passing, it’s time to start thinking about life insurance.

The question is: Which type of life insurance is the smartest investment for your family?

Whole life insurance is a type of insurance in which an insurance company invests your premiums until you die. The value of the policy increases each year; however, you’re unable to redeem the cash for any amount less than the current cash value.

Universal life insurance is a type of insurance policy that many people prefer. Universal life insurance combines temporary whole life insurance with permanent whole life insurance and is more flexible overall. If your family needs money, they can usually get it if the cash value is less than the cash surrender value.

If you’re ready to start shopping for a life insurance policy, we’ve got a few tips for you. First, figure out the type of life insurance that’s right for you. Do you want a policy that you can hold onto until the day you die? Or are you looking for a temporary policy that will give you access to cash so that you can invest the money in other investments?

Universal Life

Insurance vs. Whole Life Insurance Explained

It seems like every day we have a new acronym to type into a search engine or bring up on Google. The majority of them are unnecessary, but there are also some that are confusing. This is the case with these two types of insurance that are often lumped into the same category. In reality, they are two different products with very different forms.

The most common issue that consumers have with this ordeal is that the terminology used to explain universal life and whole life insurance is almost identical. Why do they use the same terms to explain two very different products?

Let’s start with the easiest part: whole life insurance. These two products are very different, so how about we start out by listing the similarities? Both products are designed to work as a type of coverage to protect your assets and your family. In general, both whole life and universal life insurance will hold up under almost any financial hardship.

The big difference with whole life insurance is that you have the ability to customize the policy. When you combine the policy with a variable universal life insurance policy, and you open that up to include everything from vehicle insurance to life insurance, then you have an even more customizable policy. On top of all of that, you’ll have a policy that has been designed to work in the long-term.

The No Exam Route: Whole or Universal

In order to understand which type of insurance is best for you, you should make sure to know the differences between whole life and universal life.

Whole life insurance involves paying the premiums for life; hence, your coverage never expires. It’s designed for those who expect to have high expenses later in life like raising a family.

Universal life insurance, on the other hand, can provide the flexibility of an adjustable policy that includes equity investments. With universal life, your coverage can be maintained as long as you keep your premiums up to date. Many policies include a cash reserve account that you can grow over time with interest. You can even take out loans against your cash reserve.

It’s important to weigh the pros and cons of both types when deciding on which type of insurance is right for you. Factors such as your health, age, and financial goals determine how much coverage you get and how much you pay for it. The longer the coverage term you choose, the more you pay. A lower cost is a big benefit for whole life insurance policies.

The Importance Of Life Insurance And How Much You Need

When your income is gone, your mortgage is not covered, and your savings are running out, life insurance can protect your family’s future. With the rising cost of living over the past few years, life insurance has become increasingly more important to people.

Generally, life insurance is divided into two main categories – whole life and term insurance. These two categories of life insurance are not created equal and they have different modes of coverage.

Term Life Insurance is the most inexpensive because it covers only your life.

Whole Life Insurance is more expensive but it allows your family to maintain some kind of income and financial stability after you pass away.

It also covers you for your economic losses, debt, mortgage, college tuition, final expenses, etc. It also gives you a cash value for your contribution towards your premium payments. For example, you’re giving 100 dollars a month towards your term life insurance policy, and after 5 years, if you cancel your insurance, what you have contributed will be returned to you.

Insurance companies, therefore, play an important part in your life. So you need to do your research and know what they are about before you’re willing to spend on these policies.

Getting Lower Insurance Rates

Term life insurance is generally the best life insurance to get because the premiums are lower (especially for younger people) and the coverage is higher. However, you may not be able to deduct the premiums on a term life policy as a business expense because the policy is not owned by your business.

Instead of buying term insurance, another option is getting a permanent policy that you can deduct from your taxes. The premium on permanent insurance is much higher than that on term insurance, but you may be able to deduct the entire premium on your taxes as a business expense.

This is a great reason to get permanent insurance, but make sure you buy individual coverage. Policyholders for group permanent insurance are not eligible to write off the premiums because the business is paying for the policy for the employees.

Look for a policy that includes as many riders as possible so that you can get the maximum amount of coverage for the minimum price.

Whole Life vs. Universal Life

Insurance: What’s the Difference?

The first and easiest way to think of the differences between whole life and universal life insurance is this:

Whole Life Insurance

Whole life insurance is the traditional form of life insurance where the face value of the policy increases, usually at some fairly slow rate, with the addition of interest, or the principle. Whole life insurance policies always have original premiums, the amount of money that the insured pays into the policy.

Universal Life Insurance

Universal life insurance is a modern variation on the life insurance policy. Universal life is roughly the same as whole life except that it allows the insured to take money out of the policy. This makes universal life a much more flexible policy. Instead of letting the interest stack up and increasing the face value of the policy, the money that is taken out of the policy can be invested elsewhere.

The concept of universal life allows for more flexibility and control, and is generally more advantageous over a lifetime for the average person. According to What Is Universal Life Insurance? by Mike Holt, in the long run, “the growth in a universal life policy is usually greater than the growth in a comparable whole life policy.”