How does Universal Life (UL) insurance differ from Whole Life insurance?

Universal Life (UL) insurance is distinct from Whole Life insurance primarily because it provides both flexible premiums and flexible death benefits. This flexibility is one of the defining features of UL policies, allowing policyholders to adjust their premium payments and the amount of coverage they need over time. This can be particularly beneficial for those who may experience changes in their financial situation or coverage needs.

In contrast, Whole Life insurance typically requires fixed premium payments throughout the life of the policy and has a guaranteed death benefit. The policy structure is designed for stability and predictability in costs and benefits but does not allow for changes in premium payment amounts or coverage levels once set.

UL policies also tend to have a cash value component that is tied to an interest rate determined by the insurer, which can vary, whereas Whole Life policies accumulate cash value at a guaranteed rate set by the insurer. This cash value in both types of policies grows over time, but the flexibility in managing the contributions and benefit levels associated with UL makes it a distinct choice for policyholders looking for more adaptability in their insurance coverage.