What is the Difference Between Whole Life and Flexible Universal Policy?

Two main types of permanent life insurance exist: universal life and whole life. Both provide a financial benefit in the circumstance of the insured’s death. Whole life policies use a clear-cut way for paying for the insurance. Flexible universal life policies give the policyholder, as the name implies, more flexibility.

A whole life policy is typically a policy which runs as long as the policyholder is alive. It is considered as the “traditional” policy. When the policyholder passes on, the beneficiary is given the proceeds. The policyholder is, most of the time, not entitled to any money while he or she is still alive. This means that survival benefits (or any similar benefits) do not exist as one of the terms of the policy. Usually, details such as payment schedules, benefit amount and returns rates are decided on before the insurance is issued. These details usually cannot be changed after the policy is issued.

A serious disadvantage to this type of life insurance is that it contains a little or no flexibility at all. Your policy will generally stay the same for the duration of your lifetime. Since many individuals have changing needs, this kind of policy may not be attractive to some people. Whole life policies are more suitable to those who are comfortable with inflexible terms. This type of policy is mostly purchased by those who have already settled down and will not have any more drastic changes in life.

On the other hand, flexible universal life insurance has a fluctuating premium and an adjustable death benefit during the course of the policy. It is most suitable for individuals who need flexible coverage for their changing needs during the course of their lifetime. The policy’s cash value is made up by the accumulated paid premiums, including interest paid by the insurer. Once sufficient cash value has accumulated, the policyholder will be in possession of considerable flexibility for future premium payments.

Flexible universal life insurance allows the policyholders to pay the premiums by using the tax-deferred cash value account that the insurance comes with. Investments are made through the account. For this reason, owners may possibly skip premium payments without their policy being declared as lapsed, and it can also be used to accumulate savings.

Basically, the difference of the two is that whole life insurance will not change until the policy is paid up or paid out. Meanwhile, as said before, flexible life insurance will have fluctuating costs throughout the duration of the policy.

Before deciding on which of the two is the right one, many factors have to be considered. As mentioned before, whole life insurance is most suitable for an individual who more or less has needs that will not change drastically — for example, an elderly man who is not planning on having any more children. Flexible universal life insurance, then, is most suitable for a young man who is starting a family and would want to have the option of adding benefits as the family grows. As common sense will tell you, be sure you’re purchasing the right policy for yourself.