When looking for a permanent life insurance policy, you may wonder if getting a whole life or universal life insurance policy is better. Both have savings accounts and are active for a lifetime, and they also provide a death benefit. However, they function differently and have their own pros and cons to consider.

How Does Whole Life Insurance Work?

Whole life insurance is a permanent life insurance policy featuring a savings account. As you pay premiums, a portion of them will go into a savings account. The funds build cash value and increase tax-deferred while also accruing interest. The death benefit stays the same, and premiums remain constant.

It’s better to join at a younger age because your premiums will be cheaper. The younger you are, the less likely you’ll be turned down. Another reason is that you’ll have more time to build your cash-value account.

The amount you have saved will eventually be enough to pay premiums, so your policy will essentially no longer come at a monthly cost to you. It will be useful in emergencies or any other circumstances that call for a large payment in a short time.

Whole life provides dividends, which can be paid yearly, or you can let them accrue just like the funds in your account.

The downside is that there isn’t as much growth potential as with universal life insurance. It doesn’t have much flexibility and may be too expensive to maintain. 

How Does Universal Life Insurance Work?

Like whole life, universal life insurance features a savings component where a portion of premiums goes into an account.

Instead of a premium and death benefit that stays the same throughout, universal life has a flexible premium and death benefit. Suppose you want to make your premiums lower. In that case, you can temporarily decrease your death benefit to make the policy more affordable for the time being. 

The cash value builds in accordance with investments. Instead of a fixed growth rate, your savings are placed into a stock index such as the S&P 500. You’ll benefit from a thriving market, and your gains will be greater.

However, it requires having a risk tolerance, and you face surrender fees if you make withdrawals or end your policy.

Find Coverage Today!

Game Changing Benefits is here to ensure that you get the life insurance policy that’s right for you. Not everyone is the same, and we take your preferences and circumstances into account when we give guidance. If you’re ready to enroll in whole or universal life insurance, call us today at 972-331-1060.