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There are a variety of different life insurance types. However, universal life insurance may be a great option if you are looking for flexibility around premium payments. A universal life insurance policy offers permanent life insurance with a savings element and low premiums that are similar to those of term life insurance. You are usually able to adjust your premium payments within this type of plan.1
Universal life insurance is a type of permanent life insurance plan that typically has an investment function and lower premiums.2 If a policyholder wanted to access the money within the investment portion of the plan, they would be required to pay taxes on the withdrawals.3 Compared to whole life insurance, universal life insurance has a few more options.
Universal life insurance premium payments can change over time due to a variety of factors, so it’s important for potential policyholders to consider their long-term goals.4 This may be a good choice if you are looking for permanent coverage, greater adjustability, and more awareness of how your cash value grows.
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Some life insurance companies allow you to get group universal life insurance, or you can just get a plan for yourself. This depends on this insurance company you are looking into. In both cases, the general price of the life insurance policy is the minimum amount of a premium payment that must be paid to keep the policy active.5 Three common types are guaranteed universal life insurance, indexed universal life insurance and variable universal life insurance.6 Here’s how each works:
Some of the greatest benefits of choosing a universal life insurance policy are that you have more input on how the cash value accumulates, premiums are adjustable, and they can yield a substantial death benefit.
On the other hand, there are some disadvantages to universal life insurance too. Read on to learn about these pros and cons more in depth.
You can access your universal life insurance policy’s cash value while still alive through policy loans, withdrawals, or surrendering the policy. With a policy loan, you can repay the funds over time on your own schedule. This type of loan often comes with lower interest rates. If you decide to withdraw funds, this will reduce the policy’s death benefit. Surrendering the policy would allow you to receive your policy’s cash value minus any surrender charges, but keep in mind that this means your policy will be canceled.
The cash value of a universal life insurance policy can grow at a secured rate, whether pre-determined or based on a variety of investment options.8 You can also have more say in the method that the cash value will grow.
Depending on your present circumstances, you can scale the premiums up or down.9 This can make life insurance payments less stressful if you are focused on another investment in a different phase of life.
How you adjust your premium payments can directly affect the value of your universal life insurance policy. We recommend you make these decisions carefully, balancing short-term and long-term goals evenly. In addition to adjusting your premiums, you can also modify the death benefit value.10
If your investment choice does not pay off, you will be subject to the minimum interest rate instead.11
Some people find peace knowing their premiums will not change over time. Universal life insurance may not guarantee a fixed premium payment, which may be unsettling for some consumers.
While you do have the flexibility to skip premium payments or scale the premiums down, it may not be the best long-term decision. If this becomes a habit, the premium payments in your plan may rise.12
When deciding between universal and whole life insurance, it’s important to fully understand what universal life insurance is and how it works. By this point, we have outlined that universal life insurance has greater flexibility in premium payments. However, some people prefer the stability that whole life insurance can offer.
Whole life insurance may be a better choice than universal life insurance if you’re looking for a plan with less variables and more stability. And if you only need coverage for a specific length of time, you may want to consider a Term life insurance.
Choosing the right life insurance plan is a big decision. It’s important to consider factors such as your coverage needs, dependents, goals, and budget. If you want life insurance that has adjustable premiums, universal life insurance may be right for you. But if you’re look for a less complex plan, whole or term life insurance may be right for you.
Universal life offers lifelong coverage and flexibility to adjust your premiums and death benefit. While Aflac doesn’t have universal life insurance, we do offer whole life and term life insurance plans that come with reasonable premiums and extensive coverage suited for each policyholder’s unique needs. Start chatting with an agent today to learn more about our policy options and get a quote.
1-5, 8-12 Investopedia. Universal Life Insurance. Updated February 21, 2023. https://www.investopedia.com/terms/u/universallife.asp. Accessed February 16, 2024.
6-7 Forbes. Understanding Universal Life Insurance. Updated February 8, 2024. https://www.forbes.com/advisor/life-insurance/universal-life-insurance/. Accessed February 16, 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
Life (A68000 Series) - In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. Term and Whole Life (B60000 Series) - In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life (Q60000 Series) - In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX. Group Term Life (Q60000 Series) - In Delaware, Policies Q60200M. In Arkansas, Idaho, Oklahoma, Oregon & Texas, Policies ICC18Q60200M, ICC18Q60300C, ICC18Q60400C.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
Tier One Coverage
Life (Final Expense Life) - In Arkansas, Delaware, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22.
Tier One coverage is underwritten by Tier One Insurance Company.
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.
Aflac’s family of insurers include Aflac, Aflac New York, Continental American Insurance Company, and Tier One Insurance Company.
Aflac WWHQ | Tier One Insurance Company | 1932 Wynnton Road | Columbus, GA 31999.
Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211
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