What is the difference between whole life and universal life insurance?
Asked by: Emilia Harvey | Last update: August 12, 2025Score: 5/5 (58 votes)
Which is better whole life or universal life?
Generally, whole life is simpler and more predictable, and universal life allows for more flexibility throughout the duration of your policy. Explore Progressive's editorial standards for Answers articles to find out why you can trust the insurance information you find here.
What are the disadvantages of universal life insurance?
Some of the drawbacks include caps on returns and no guarantees as to the premium amounts or market returns. An IUL insurance policy may be canceled if you stop paying premiums. IUL policies are generally best for those with large up-front investments who want options for a tax-free retirement.
What is the major advantage to universal life insurance?
Pros: Benefits of Universal Life Insurance Policies
Flexibility in Premium Payments: One of the most significant benefits of UL policies is the ability to adjust premium payments. You can increase, decrease, or skip premium payments if the policy's cash value sufficiently covers the costs.
What are two disadvantages of whole life insurance?
A more complex product than term life insurance. Higher premiums than term life insurance. Could be costly if coverage lapses early.
Whole life vs Universal life
What does whole life insurance not cover?
Life insurance pays beneficiaries upon the insured's death, covering expenses like mortgages, education, and future income. Life insurance policies cover most causes of death, but exclusions such as suicide, dangerous or illegal activities, substance abuse, and misrepresentation can apply.
What does Dave Ramsey recommend for life insurance?
Core Ramsey Teaching: You only need life insurance while you have people depending on your income. Buy a 10–20-year term policy worth 10–12 times your annual income. Since life insurance is only for the short-term, you should only buy term life insurance. (Hence the name.)
Can you cash out universal life insurance?
A policy owner of universal life insurance has the ability to access their cash in the form of either a life insurance loan, life settlement, or viatical settlement. It is important to remember that withdrawals from a policy's cash value reduce its death benefit and have different tax consequences.
Why do people buy universal life?
For high-net-worth individuals, a universal life insurance policy is a popular choice. A cash lump sum payout from a life insurance policy can provide a family with a financial lifeline if the breadwinner passes away. The cash can protect a family's lifestyle.
What does Suze Orman say about universal life insurance?
One of my key life insurance rules is this: Stick with term life insurance. Unless you have someone in your family with special needs, there is typically no need to buy whole life, or universal life, which are referred to as “permanent” policies and cost a lot more.
What is the bad side of IUL?
An IUL is a very bad option for retirement planning. As with any investment tied to an index fund, your returns will be mediocre at best. About the most you can expect the cash value to do is beat inflation over time—and even that's iffy.
What happens when a universal life policy matures?
Generally, when a policy reaches its maturity date, you receive a payment and the coverage ends. Depending on the policy, the payment might be the death benefit or a specified amount, but it's usually equal to the policy's cash value.
Which is better, IUL or Roth IRA?
They also provide tax-free income in retirement. Therefore, investors concerned about their family's welfare after they're gone may prefer an IUL, while those who want a tax-free income stream during retirement can opt for a Roth IRA.
What is the best age to buy universal life insurance?
Again, buying a Permanent or Universal life insurance policy in your 20's will allow for accumulation of considerable sums of money (lower premiums plus a cash value) and can actually save a fortune in years to come.
What happens if I outlive my universal life insurance?
If you are still living when a universal life insurance policy matures, you may be able to receive a lump-sum payment equal to the cash value of your policy. However, this generally only occurs for plans that have maturity dates, and only if the insured person has outlived the maturity date.
What is the best life insurance?
- Guardian: 10, 15, 20 or 30 years.
- MassMutual: 1, 10, 15, 20, 25 or 30 years.
- Northwestern Mutual: 1, 10 or 20 years.
- Thrivent: 10, 15, 20 or 30 years.
- Pacific Life: 10, 15, 20, 25 or 30 years.
- New York Life: 1, 10, 15 or 20 years.
- Penn Mutual: 10, 15, 20 or 30 years.
What life insurance do rich people use?
[H3] Cash Value or Whole Life Insurance
Cash value life insurance (also called whole life insurance) is a great form of life insurance for wealthy individuals. This type of policy provides a way to have tax-deferred savings, especially if you've maxed out other retirement accounts.
Is universal life insurance risky?
Variable universal life insurance has a cash value portion that's invested in various subaccounts of your choice. It has higher potential returns and losses, so it comes with greater risk.
What is the cash value of a $10,000 whole life insurance policy?
Most whole life insurance policies mature at 121 years, although some mature at 100 years. Say, for example, that you purchase an insurance policy with a face value of $10,000. Once the policy matures, the cash value of the policy should equal $10,000.
Do I get money back if I cancel my universal life insurance?
If you have a whole life or universal life insurance policy, you can also cancel the policy at any time. You won't get back any premiums you paid for the policy, but you may receive a payout from the cash value, if one has accrued.
Can I take a loan from my universal life insurance policy?
Life insurance loans are only available on permanent life insurance policies — such as whole life and universal life — that have a cash value component. You likely can't borrow against a term life insurance policy since it probably doesn't have cash value.
What does Suze Orman think about life insurance?
With that in mind, in my opinion, the only type of life insurance that makes sense is term, which is good for a specific period of time. The premium is based on your age, gender, health, the death benefit desired, and the term.
What type of life insurance gives the greatest amount?
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.
What 4 investments does Dave Ramsey recommend?
A diversified portfolio typically includes a mix of stocks, bonds, and mutual funds, balancing growth and stability. Ramsey often recommends allocating investments into four types of mutual funds: growth, growth and income, aggressive growth, and international funds.