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Universal life and whole life insurance are both types of permanent life policies, but there are several noteworthy differences between them. Compared to whole life insurance, a universal life policy is more flexible because it allows you to change your premiums and death benefit to better suit your needs. Here’s what you should know about universal life insurance vs. whole life insurance so you can decide which plan is right for you.
If you invest in universal life insurance, this policy will last for your entire life if you continue paying premiums. Your premiums and death benefits won’t be set in stone, meaning you can adjust them as your circumstances change. Depending on the type of universal policy you choose, you may also have a cash value component, which allows you to take out money through a loan or withdrawal while you’re still alive.1
A whole life insurance policy is similar to universal life insurance in that it also includes a death benefit and cash value that remain active for your entire life. However, its premiums and death benefit will stay the same over time. Once you commit to a policy, you won’t be able to change them.2
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Here’s a closer look at how whole life and universal life insurance differ:
One significant difference between whole and universal life insurance is that a universal life plan is more flexible. Your premium payments and death benefit can be adjusted with a universal life policy, while they can’t change with whole life insurance.3
Since the premiums and death benefit are guaranteed to stay the same, and the cash value has a minimum guaranteed rate of return,4 whole life insurance has higher premiums than universal life insurance.
Whole life insurance comes with a guaranteed cash value over the life of the policy. Universal life insurance can also build cash value, but it may fluctuate based on factors like the way you fund it and the investments your life insurance company chooses.3
You can receive dividends from a whole life insurance policy. If you do, you may add them to your cash value or withdraw the funds. Universal life insurance does not offer dividends.
Whether you’d be better off with whole life insurance or universal life insurance depends on your unique situation. If you want your premiums, death benefit, and cash value to be guaranteed and don’t mind paying extra for this convenience, whole life insurance is likely your best bet. But if you’re searching for a more flexible policy, you might want to consider universal life insurance.
Here are some alternatives to whole life and universal life insurance:
Term life insurance will last for a limited period of time, like 10, 20, or 30 years. If you pass away before your policy expires, your beneficiaries will collect a death benefit.
Guaranteed issue life insurance doesn’t require a medical exam. In many cases, you’ll be accepted for it if you apply and be able to support your beneficiaries financially upon your death.
Final expense insurance helps your beneficiaries pay for end-of-life costs and final expenses after you pass away. These might include medical debts and funeral and burial fees.
With a simplified issue life insurance plan you don’t have to take a medical exam and may get approved once you fill out several questions about your health.
Both universal and whole life insurance can offer lifelong coverage, but it’s wise to consider their differences when deciding on a policy. Additionally, there are plenty of alternative options to consider, such as term life and final expense insurance, if another policy would better suit your needs.
Aflac offers term and whole life insurance policies with great coverage. Both options can help you to protect your loved ones financially in case the unexpected happens. Get a quote today!
1 Forbes - Universal Life Insurance Explained. Updated February 20, 2024. https://www.forbes.com/advisor/life-insurance/universal-life-insurance/. Accessed August 30, 2024.
2 Nerdwallet - Whole Life Insurance Definition. Updated April 19, 2023. https://www.nerdwallet.com/article/insurance/whole-life-insurance-definition. Accessed August 30, 2024.
3 U.S. News & World Report - What Is Universal Life Insurance? Updated April 22, 2024. https://www.usnews.com/insurance/life-insurance/universal-life-insurance. Accessed August 30, 2024.
4 Forbes – What is Whole Life Insurance? (And How Does It Work?) Updated March 29, 2023. https://www.forbes.com/advisor/life-insurance/whole-life-insurance/. Accessed August 30, 2024.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.
Aflac life plans - 68000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. 65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.
Aflac Final Expense insurance coverage is underwritten by Tier One Insurance Company, a subsidiary of Aflac Incorporated and is administered by Aetna Life Insurance Company. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (Tier One NAIC 92908).
In AR, DE, ID, OK and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Aflac Final Expense policies are not available in New York.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
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Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211
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