What Is The Difference Between Universal And Whole Life Insurance?

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   Ted Ratliff

   Owner, SFS Associates,

   Whole life insurance has a specified premium that never goes up, a specified death benefit that will not expire unless the policy lapses or you die or surrender the policy, and guaranteed cash value build up.  Universal life has flexible premiums, you can vary the amount you put into the plan.  It has a flexible death benefit, you can decrease the amount of insurance or increase the amount of insurance without having to take out a new policy.  Because the premiums are flexible there is no guaranteed cash value.  Most will have a guaranteed interest rate on any cash value.  The danger with a Universal Life is under funding the contract.  Because you are not locked into a set premium and there is an interest component that is not guaranteed, if the insured fails to put enough in the contract and the cost of insurance becomes greater than the cash value the policy will expire.  It is important to make sure you properly fund your Universal life.  Whole life has better guarantees than Universal life and less risk.

   Answered on June 9, 2013

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