Whole Life vs Universal Life Insurance
The difference between Whole Life and Universal Life Insurance

Whole Life Insurance vs. Universal Life Insurance

Life insurance helps protect your family and can provide a non-taxable death benefit for loved ones you want to take care of when you pass away. It also covers outstanding debts such as your mortgage and personal loans, car loans, etc. After retirement, your individual life insurance provides coverage for funeral and final expenses, whatever the need. 


Consumers of life insurance policies must decide among a wide range of available options, and it is important to understand the similarities and differences between life policies that are available. This article is going to explain the types of permanent life insurance you can purchase: Whole Life and Universal Life Insurance.

Participating Whole Life Insurance vs Universal Life Insurance

These two types of life insurance are both forms of Permanent Life insurance. A permanent life insurance policy provides lifetime coverage. These policies contain non-forfeiture options such as policy loans, reduced paid-up, extended term, and cash surrender options. If you cancel your policy outright, you may get back any cash value minus fees.

These policies typically contain two parts: an investment or savings portion and an insurance portion. Permanent life insurance is more expensive than term life policies. 

Buyers can borrow against the cash value of the policy and, for this reason, it is sometimes known as cash value insurance. Whole Life and Universal Life insurance policies resemble each other in some respects, but there are important differences between them.

What is Whole Life and how does the Cash Value component work?

Whole Life insurance combines a guaranteed death benefit with a savings component called a cash value. This means that your coverage will never lapse while you’re still alive, while simultaneously growing more valuable over time.

The cost of the life insurance policy will depend on a number of factors including coverage amount, age, gender, smoking status, health, and morbidity at the time of purchase. Initially, it can cost five to ten times more than a term policy.  

Whole Life has two additional premium options, Participating and Nonparticipating.  Participating life insurance policies, in addition to paying out regular dividends, can help you reduce the cost of your insurance and accumulate substantial amounts for a future payout, if you choose to do so. Depending on the option chosen, dividends may even offer tax-shelter benefits.

Dividends are not guaranteed and rates may increase or decrease from those illustrated, based on a number of factors. The insurer collects and analyzes mortality experience, expense, and investment data for each group of policies and makes a recommendation to the Board of Directors. The Board considers the recommendations and then determines the dividend scales for the next year.

Pros and Cons of Whole Life Insurance Policies

One advantage of Whole Life policies is that they offer a guaranteed cash value. You can borrow against it or surrender your policy in the case of an emergency, for which you can get a lump-sum payment.

If you buy participating Whole Life insurance, the dividends the life insurance company pays may give you flexibility. You can choose to receive your dividends as cash, let them accumulate in a dividend reinvestment plan that pays additional interest or use them to reduce your monthly premiums.

However, the cost of coverage is higher than Term Life insurance policies due to level premiums, attractive living benefits and fixed death benefits. Whole Life insurance initially costs five to ten times more than Term Life insurance, but it will eventually exceed that cost and then in most cases expire before a claim is paid.

What is Universal Life Insurance and can it act as an Investment Account?

Universal Life insurance is an alternative to explore if you’re searching for a plan that will give you flexible lifetime coverage and long-term savings. The policy has an investment component and is more expensive than Term Life insurance. 

The policy also features a cash value component that can be used to accumulate savings. In addition, you may adjust your premium payments and death benefit. The Universal Life policy contains investment options that can be changed up as you wish. You have a significant choice of fund vehicles that must be monitored to make certain you get the optimal return for your savings.

Pros and Cons of Universal Life Insurance Policies

In a Universal Life policy, the face value of your coverage can be adjusted without surrendering the policy. When your financial circumstances or other responsibilities change, you might be able to increase, decrease, or even stop your premium payments.

Another perk is the ability to withdraw or borrow funds from your cash value account to help pay for expenses. Doing this too frequently, however, can deplete the value of your cash value account and leave you without any life insurance when you need it most.

One potential drawback of a Universal Life insurance policy is the interest rate, which is dependent on market conditions. However, if the policy performs well, you can enjoy a potential growth in your savings fund.

Another disadvantage is that surrender charges may be levied at the time of terminating your policy or withdrawing money from the account value.

Whole Life vs Universal Life: What Insurance Coverage is Best for You

When buying Life Insurance, you should work with an experienced Insurance Agent since the process can be complicated. Experior Financial Group Associates deliver Life Insurance quotes tailored to the needs of the person.

Our Associates are knowledgeable in Insurance costs and will help clients understand the market value adjustments and cancellation charges associated with their policies. We will explain the content of the policies, so that you can choose the most appropriate financial plan for your needs. Our Agents work with the most respected insurance companies, after assessing the market performance of the industry.

Aside from Whole and Universal Life, our Associates can explore other forms of Insurance with you such as Term, Disability, and Critical Illness, and more. In addition, Experior Financial Group can help you create a complete investment portfolio tailored to meet your investment goals.

Our licensed financial services Associates use traditional investment tools and cutting-edge investment planning techniques to help you create an investment plan that’s right for you. 

Regardless of the type of Life Insurance policy you choose, our job as your Insurance Agent is to find the best value and coverage for you. We compare quotes from multiple insurance companies to find you the best policy at a competitive price.

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