Whole Life vs. Universal Life Insurance

Shawn Plummer

CEO, The Annuity Expert

As life progresses, you naturally start thinking about your future and the financial security of your loved ones. Choosing the right life insurance policy is a critical decision in this process. Today, we focus on Whole Life vs. Universal Life Insurance. This guide will delve into their differences, costs, and benefits, assisting you in making an informed choice that best suits your needs.

Understanding Whole Life And Universal Life Insurance

Before we compare, let’s understand what each insurance type is.

Whole Life Insurance

Whole life insurance provides lifelong coverage and accumulates a cash value over time. This policy guarantees a death benefit to beneficiaries and has a savings component, which can be borrowed against or cashed in during the policyholder’s lifetime.

Example: If John purchases a whole life insurance policy at 30, he will be covered for his entire life, assuming he continues to pay his premiums. Moreover, part of his premium will be allocated to a cash value account, which will grow over time.

Universal Life Insurance

Universal life insurance is another permanent life insurance that provides death benefit coverage for the policyholder’s life. However, it adds a layer of flexibility, allowing you to adjust your premiums and death benefit amounts over time, depending on your financial needs.

Example: Mary buys a universal life insurance policy at the same age as John. But unlike John, Mary can increase or decrease her death benefit or premium amounts based on her changing financial circumstances.

Whole Life Vs. Universal Life Insurance

Whole Life Insurance vs. Universal Life Insurance: The Differences

Now that we understand the basics of each type, let’s dive deeper into the comparison between whole life and universal life insurance.


Universal life insurance offers more flexibility than whole life insurance. With universal life, you can adjust your premium payments and death benefit per your circumstances. On the other hand, whole life insurance has fixed premium payments and a guaranteed death benefit, offering less flexibility but more predictability.

Cash Value Growth

Both policies have a cash value component, but the way they grow differs. Whole life insurance guarantees a specific rate of growth on the cash value. In contrast, universal life insurance ties the growth to a market index or a fixed interest rate, potentially providing higher returns but involving more risk.

Whole Life Or Universal Life Insurance

Why is Whole Life Insurance More Expensive than Universal Life Insurance?

Whole life insurance is generally more expensive than universal life insurance due to its guarantees. It guarantees a specific death benefit, a fixed premium, and a certain growth rate on the cash value. These guarantees provide stability and predictability, but they come at a cost.

Which is Cheaper: Whole Life or Universal Life Insurance?

Universal life insurance tends to be cheaper than whole life insurance. This is because of the level of risk that the insurer takes with each policy. With universal life insurance, some risk is passed on to the policyholder due to the variability in cash value growth and flexibility in premium payments and death benefits.

Should You Get Universal or Whole Life Insurance?

Your decision should hinge on your financial goals, needs, and risk tolerance, including considerations related to social security benefits. Universal life insurance might be a better choice if you desire flexibility, potentially higher returns (with more risk), and additional income besides your social security. However, suppose you prefer predictability and stability and don’t mind paying higher premiums for guaranteed benefits that could complement your social security. In that case, whole-life insurance may be more suitable for you.

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Next Steps

When deciding between universal life insurance vs. whole life insurance vs. term life insurance, understanding your long-term goals and financial capabilities is essential. Each policy has its pros and cons, its costs and benefits. Whether you opt for the predictability of whole life, the flexibility of universal life, or the simplicity of term life, ensure your choice aligns with your financial roadmap and offers peace of mind knowing your loved ones will be taken care of. Remember, your life insurance policy is integral to your financial portfolio, so consider it with as much care as any other investment.

Difference In Whole Life And Universal Life Insurance

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Frequently Asked Questions

Which is better whole life or universal life?

Many people prefer whole life insurance because it provides stability and the possibility of increasing coverage through dividends over time. Additionally, the premiums will never change, which is desirable for those seeking reliability in their insurance coverage.

Can you convert universal life to whole life?

Converting a universal life insurance policy to a paid-up whole life insurance policy is possible, but the process details may differ based on your insurance company and policy terms.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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