Different Types

While whole life insurance covers the policyholder for their entire life, universal life does the same but with different financial incentives. Whole life policies offer a level rate and steady cash value gain while universal life gives the ability to flexibly adjust the premium and death benefit balance, invest premiums along with the policy’s cash value, and save money in a variety of unique ways.

Premiums can be adjusted upwards to increase the death benefit at will, and can also exceed the minimum amount to add to the cash value of the policy in an intentional manner. If the premiums are covered every month, either through payment or by returns on smart investments, the policy stays in effect and keeps growing.

The biggest benefit comes by way of allowing policyholders to use this cash value. The uses may include borrowing funds with the policy as collateral, withdrawing cash, paying for medical treatment, specifically stipulating how death benefits are paid to beneficiaries, and the ability to pay ongoing premiums with returns.

This might be a particularly attractive strategy for younger people seeking out universal policies since they have usually not had a very long investing track record. Many universal life policies allow policyholders to invest their premiums and excess cash value as they see fit. Young couples without other investments are well-served by the ability to flexibly add to their premiums considering the prospect of earning higher returns.