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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: PeopleImages/Getty Images August 30, 2021 Mandy Sleight has been a licensed insurance agent since 2005. She has three years of experience writing for insurance websites such as Bankrate, MoneyGeek and The Simple Dollar. Mandy writes about auto, homeowners, renters, life insurance, disability and supplemental insurance products. Rebekah Personius is an insurance editor for Bankrate. She coordinates the creation of educational insurance content that helps people make informed insurance decisions. Rebekah has worked in the insurance space for over a year with homeowners dealing with claim resolution after large scale losses in widely affected areas. Although her expertise is primarily centered around Property & Casualty claims, she has worked with compliance and industry experts on auto, life, home and renters insurance content since January 2020. In her down time, Rebekah enjoys staying active, learning about investing, and studying everything related to psychology. She is also currently working to finish her bachelor’s degree in Business Management through Western Governors University. Bankrate logo The Bankrate promise
At Bankrate, we strive to help you make smarter financial decisions. To help readers understand how insurance affects their finances, we have licensed insurance professionals on staff who have spent a combined 47 years in the auto, home and life insurance industries. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation of how we make money. Our content is backed by LLC, a licensed entity (NPN: 19966249). For more information, please see our Insurance Disclosure. Bankrate logo The Bankrate promise
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Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. More than half of Americans own life insurance, with , according to LIRMA’s 2020 study. Life insurance is an important resource as you build out a long-term financial strategy for you and your family. It provides your family with a monetary death benefit in the event you pass away, which can cover end-of-life expenses or help your beneficiary’s financial future. This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. The offers and clickable links that appear on this advertisement are from companies that compensate Homeinsurance.com LLC in different ways. The compensation received and other factors, such as your location, may impact what ads and links appear, and how, where, and in what order they appear. While we seek to provide a wide range of offers, we do not include every product or service that may be available to you as a consumer. We strive to keep our information accurate and up-to-date, but some information may not be current. Your actual offer terms from an advertiser may be different than the offer terms on this widget. All offers may be subject to additional terms and conditions of the advertiser. Compare life insurance providers quickly and easily
See which provider is right for you. The amount of coverage you need depends on many factors, including your age, income, mortgage and other debts and anticipated funeral expenses. Whole life insurance combines life insurance with an investment component. Coverage for life Tax-deferred savings benefit if premiums are paid 3 variations of permanent insurance: whole life, universal life and variable life include investment component Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time. Fixed premium over term No savings benefits Outliving policy or policy cancellation results in no money back Find matches Powered by HomeInsurance.com (NPN: 8781838) This advertising widget is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Bankrate Why Lemonade? It's a fresh twist on life insurance: easy, accessible and affordable. See more providers in Choose from insurers in Show More There are different providing coverage for temporary or permanent needs. Universal life insurance is a permanent policy with flexible benefits and premiums, allowing changes as your lifestyle or finances change. What is universal life insurance
With a , you make premium payments in exchange for a set death benefit. As you pay your premium over time, part of the money goes into an account that accumulates a cash value while earning interest. In other words, a universal life insurance policy also acts as a savings account. As the cash value grows, you can opt for a lower premium payment using the savings to make up the difference. What are the pros and cons of universal life insurance
Pros
Builds cash value: Like whole life insurance, universal life insurance has a cash value component that grows with the policy. You can borrow against the cash value, use it to pay premiums or surrender the policy for the cash value if you no longer have the need for permanent life insurance. Borrowing against the cash value does not require a credit check and is tax free. If you do not pay back the loan, the death benefit will be reduced by the outstanding loan balance. More flexibility than whole life insurance: Universal life insurance offers the ability to increase or decrease the death benefit and adjust premiums if needed. This flexibility is not found in whole life insurance, which is one thing that sets universal life insurance apart. If a life event happens, like having a baby, you can increase your death benefit — though you will have to pay the increased cost. Investment strategy options: There is more than one type of universal life insurance, including indexed and guaranteed. Indexed universal life insurance offers stock index returns which offer growth potential you can cash out later if needed. Guaranteed universal life insurance offers a fixed option guaranteed to provide the death benefit until a specified age determined by the life insurance company. Cons
Monitoring is required: Unless you choose guaranteed universal life insurance, it is not a policy you should set up and forget about. If the policy is not funded properly with at least the target premium, it could lapse. If using the cash value to pay premiums, make sure the value does not diminish to the point where the policy is in danger of lapsing. Building cash value takes time: It can take time to build enough cash value in a universal life insurance policy to make it usable, especially if you pay the minimum target premium. Paying more than the minimum can help the cash value grow faster. Not all universal life insurance policies are created equal. Some policies have a guaranteed growth potential while others do not, which may help you decide which policy type and carrier to choose. An increase may require a health exam: While flexibility in raising the death benefit amount is a nice benefit, some carriers require a medical exam for the increased amount. The cost of the increased death benefit is subject to health exam results, which may be more than you thought if you are not in great health. If this is a reason for choosing universal life insurance, ask your insurance agent about the carrier’s requirements about increasing coverage. How does universal life insurance work
Universal life is structured to have two distinct components. Part of your premium payment goes to the insurer, contributing to your death benefit and administrative costs. Another part goes into a savings vehicle that earns some type of interest. You have a few options of what to do with that money as time goes on. Cover your premiums
One option is to use the money to cover your premium payments, rather than paying out-of-pocket. Some people appreciate this flexibility in case they hit a financial roadblock down the road. Borrow from the savings account
You can also withdraw or borrow money from the savings account. Each has rules about how much you can borrow and what happens to your death benefit (in some cases, it may be reduced). Also, check to see if you’ll owe any taxes before dipping into your universal life policy. Be careful that you don’t drain your account completely, which could cause your policy to lapse — meaning your beneficiaries wouldn’t receive a death benefit even if you’ve held a universal life insurance policy for years. Learn more: Types of universal life insurance
While the overall concept of universal life insurance is much more flexible compared to a term life policy, there are a few different types you can choose from depending on your goals and financial situation. Indexed universal life policies
An indexed universal life policy is tied to a market index. That means the savings portion of your account will fluctuate based on the performance of the stock market. Your insurance company will also likely take off an additional administrative fee for managing your account. Obviously, this is a riskier option because you don’t have a fixed interest rate and your account value can drop. Guaranteed universal life policies
This is a low-risk option with a fixed premium for your entire life. Your account won’t grow significantly in terms of cash value, but you’ll have a consistent premium that doesn’t change based on the stock market. It’s not a growth-oriented type of universal life insurance policy, but it’s also not a volatile one. Variable universal life policies
Variable universal life is similar to an indexed policy, except that you can diversify your investments through money market accounts. There’s still a level of risk because there’s no way to predict how the stock market will perform, even with your funds diversified. Like an indexed universal life policy, you’ll be charged administrative fees with this one as well. Is universal life insurance worth it
One of the benefits of getting a universal life insurance policy is that your death benefit remains valid as long as you keep up with your premiums. This is different from term life insurance, which only lasts between five and 30 years, depending on your policy. If you want a policy that sticks with you as you get older, universal life is a good option. You may also be attracted to the cash value component of universal life insurance. But it’s always smart to talk to a financial advisor and compare all savings vehicles before making a decision. Learn more: Frequently asked questions
What are the disadvantages of universal life insurance
Universal life insurance typically comes with higher premium payments compared to a term life option. Also, you’ll likely have to pay administrative fees for the cash value component. The cash in your savings vehicle can fluctuate, particularly if it’s tied to an index or mutual fund. That can cause your premium to increase, putting a greater financial strain on your wallet. What is the difference between whole and universal life insurance
Both are types of permanent life insurance, so your policy doesn’t expire because you hit a certain age. The main difference is how the cash value portion of the account is handled. With whole life insurance, your premium is fixed. With universal, your premium can change if you opt to pay for it with your accumulated cash value. Because the value of your cash savings can change, your premium payment can jump up if your cash value goes down or you borrow money from it. Why should you buy universal life insurance
Universal life insurance may be a good choice if you want that permanent coverage. Term life, for example, is ideal if you only want the death benefit for a certain period of your life, such as when your kids or young or you have a large mortgage. If you want your beneficiaries to receive a death benefit even if you pass at an old age, universal life could be a more without it ever expiring. Learn more: Should you cash out your universal life insurance policy
It’s typically best to only cash out your universal life insurance policy if you’re in the midst of a major financial emergency. If you do, make sure you understand any tax implications, especially if your contributions were made in a tax-advantaged account. In some cases, any withdrawals may result in higher tax payment. Also, find out what happens to your death benefit. Oftentimes, your death benefit is reduced if you take money out of your savings vehicle. SHARE: Mandy Sleight has been a licensed insurance agent since 2005. She has three years of experience writing for insurance websites such as Bankrate, MoneyGeek and The Simple Dollar. Mandy writes about auto, homeowners, renters, life insurance, disability and supplemental insurance products. Rebekah Personius is an insurance editor for Bankrate. She coordinates the creation of educational insurance content that helps people make informed insurance decisions. Rebekah has worked in the insurance space for over a year with homeowners dealing with claim resolution after large scale losses in widely affected areas. Although her expertise is primarily centered around Property & Casualty claims, she has worked with compliance and industry experts on auto, life, home and renters insurance content since January 2020. In her down time, Rebekah enjoys staying active, learning about investing, and studying everything related to psychology. She is also currently working to finish her bachelor’s degree in Business Management through Western Governors University.