What's the Difference Between Whole and Universal Life Insurance?

Real-life builds cash value, and the premiums are fixed, whereas universal insurance allows you to charge premium amounts.

4 min read
What's the Difference Between Whole and Universal Life Insurance?
Photo by Ravi Roshan / Unsplash

What's the difference between whole life insurance and universal life insurance? While both policies are long-term investments, there are critical differences. Real-life builds cash value, and the premiums are fixed, whereas universal insurance allows you to charge premium amounts. This flexibility is crucial for those who want to control premium and cash value fluctuations. If you're going to take advantage of the best benefits of both policies, read on.


While whole life insurance premiums will always be higher than universal ones, you can lock in lower rates while you're young. If you're older, wait until you're more comfortable with stock market growth before buying a whole life insurance policy. You'll also be better protected from future rate increases. However, keep in mind that whole life insurance premiums will continue to be higher than universal ones for the same amount of coverage.

One of the most important things to consider before purchasing a life insurance policy is the number of premiums you can afford to pay. While universal life insurance premiums are more flexible than whole life, some individuals prefer a fixed-rate tip. Also, accurate life premiums are not based on the market value, so they are less volatile. However, you can increase your coverage over time with dividends. The main difference between the two is the reliability of the policies.


The flexibility of a flexible whole-life policy depends on several factors. The amount of cash you build up in the account, the interest rate, and whether or not you can take loans or withdrawals from it are crucial factors. The flexibility of this type of insurance plan also depends on the IRS guidelines and minimum premium limits. There are pros and cons to both types. However, if you're not sure which policy to choose, you can start by comparing the features of these two types of insurance policies.

While whole life insurance policies offer more guarantees, they also have a higher premium. Those with more money to spare should consider a universal life policy. While universal life insurance may offer lower premiums and more flexibility, both approaches have some risks. You may want to consider an insurance expert's advice if you aren't sure which type is suitable. Regardless of your situation, it is essential to understand the differences between universal life insurance and whole-life policies.

Premium guarantees

Premium guarantees for whole versus universal life insurance differ by issuer and policy term. Most universal life insurance policies come with a confirmation of interest rates of two to three percent, which is lower than the crediting rate but still higher than the market rate. In addition, guaranteed universal life insurance policies offer benefits such as assured cash values, which increase over time, and options to skip or pay less than the scheduled premium. This kind of coverage also has more flexibility, such as paying premiums over time or even borrowing against the policy's cash value.

One significant difference between whole and universal life insurance policies is the cash value, which can be accessed during the policyholder's lifetime for any purpose. While whole life policies have guaranteed cash values, universal ones allow policyholders to withdraw all or a portion of the cash value, regardless of the policy's duration. Although universal life insurance policies have a higher cash value growth rate, the risk is higher if the insured dies before the cash value has grown.

Cash value

Both whole and universal life policies are permanent, meaning they will continue to pay their death benefits after they die. The main difference between these two types of life insurance is the ability of a policy to change the death benefit amount. Both approaches will pay the death benefit amount when the owner dies, but you'll have to pay a higher interest rate if you choose to use your cash value. If you want to make a withdrawal, you should know that you may lose a substantial amount of money.

The main benefit of a universal life policy is that it will grow a cash value that can be used to pay premiums when needed. With a whole life policy, you can adjust your death benefit, but you'll have to undergo a medical exam. Likewise, the cash value in a universal policy can be borrowed to pay for premiums. The risk with borrowing from the cash value of a universal approach is that repeated withdrawals will lower the cash value.

Non-forfeiture policy

A non-forfeiture policy is an insurance plan that does not forfeit if the policy owner does not pay the premiums. If the policy owner has produced all of the term's bonuses, they can choose to reinstate it by paying back the remaining tips. If they fail to do so, the insurance company will pick an option for them. The non-forfeiture option is beneficial for those who have older policies and want to ensure they are still covered for the amount of time they have paid.

A non-forfeiture policy is an option offered by all whole life policies. This option allows policyholders to voluntarily stop paying premiums if they cannot do so for some reason. However, this option comes with several exclusions and is more expensive. A non-forfeiture policy can be subject to rating, which is the practice of charging a higher premium to applicants who are at a higher risk of death. Some procedures allow policyholders to take cash value from a surrendered policy and purchase a fully paid-up policy. In this case, reinstatement requires the policyholder to prove that they are still healthy.