I have heard a lot about universal life insurance. How is this type of 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. However, there are several important differences between these two products. While WL policies contemplate the payment of fixed, level premiums and provide for level death benefits, UL policies offer adjustable death benefits and flexible premiums that can be varied according to changing circumstances. This is a rather simplistic comparison, however, since policyowner dividends under participating WL insurance contracts can be used to offset a portion of the premium payment otherwise required; in addition, dividends can be used to increase the policy’s death benefit. Because of these and other possible uses of policyowner dividends, an argument can be made that participating WL insurance possesses some (but not all) of the same flexibility/adjustability that is possessed by UL policies. Another important difference between WL and UL relates to product transparency.
Both traditional whole life (WL) and universal life (UL) products are examples of cash-value life insurance. However, there are several important differences between these two products. While WL policies contemplate the payment of fixed, level premiums and provide for level death benefits, UL policies offer adjustable death benefits and flexible premiums that can be varied according to changing circumstances. This is a rather simplistic comparison, however, since policy owner dividends under participating WL insurance contracts can be used to offset a portion of the premium payment otherwise required; in addition, dividends can be used to increase the policy’s death benefit. Because of these and other possible uses of policy owner dividends, an argument can be made that participating WL insurance possesses some (but not all) of the same flexibility/adjustability that is possessed by UL policies. Another important difference between WL and UL relates to product transparency. In UL polic
