How is universal life insurance different from traditional whole life insurance?
Both traditional whole life (WL) and universal life (UL) products are examples of cash-value life insurance. But there are several important differences between them. One relates to product transparency. In UL policies, it’s easy to look at the internal operations of the policy and to examine the relationships among various policy elements (premiums, cash values, interest credits, mortality charges, and expenses) and how they interact with each other. Another difference is that unlike whole life policies, universal life policy returns were freed from long-term, fixed-rate contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. After the initial payment, universal life allows you to pay premiums anytime, in virtually any amount, subject to certain minimums and maximums. You can also reduce or increase the amount of the death benefit more easily than under a traditional whole life policy.
Both traditional whole life (WL) and universal life (UL) products are examples of cash-value life insurance. But there are several important differences between them. One relates to product transparency. In UL policies, its easy to look at the internal operations of the policy and to examine the relationships among various policy elements (premiums, cash values, interest credits, mortality charges, and expenses) and how they interact with each other. Another difference is that unlike whole life policies, universal life policy returns were freed from long-term, fixed-rate contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. After the initial payment, universal life allows you to pay premiums anytime, in virtually any amount, subject to certain minimums and maximums. You can also reduce or increase the amount of the death benefit more easily than under a traditional whole life policy.
Both traditional whole life (WL) and universal life (UL) products are examples of cash-value life insurance. But there are several important differences between them. One relates to product transparency. In UL policies, it’s easy to look at the internal operations of the policy and to examine the relationships among various policy elements (premiums, cash values, interest credits, mortality charges, and expenses) and how they interact with each other. Another difference is that unlike whole life policies, universal life policy returns were freed from long-term, fixed-rate contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. After the initial payment, universal life allows you to pay premiums anytime, in virtually any amount, subject to certain minimums and maximums. You can also reduce or increase the amount of the death benefit more easily than under a traditional whole life policy.
