What is the Difference Between Universal and Variable Life Insurance?
When it comes to protecting your family in the event of your death, life insurance is an essential financial tool. There are two main types of life insurance policies available: universal and variable. Understanding the distinctions between these two types of coverage can help you make an informed decision about which one is right for you.
Universal Life Insurance
Universal life insurance is a form of permanent life insurance that provides flexible premiums, cash value accumulation, and potential death benefit protection. This type of policy offers lifelong coverage and allows you to adjust both the premium payments and death benefit amount over time. The cash value portion accumulates tax-deferred, meaning that any gains are not taxed until they are withdrawn.
The primary advantage of universal life insurance is its flexibility. You can modify your premiums and death benefit amount as needed based on your changing financial needs. Additionally, you can borrow against the cash value if necessary in an emergency.
Variable Life Insurance
Variable life insurance is another type of permanent policy that also offers adjustable premiums, cash value accumulation, and potential death benefit protection. However, this type differs from universal in that it invests its funds into separate accounts such as stocks, bonds or mutual funds.
The primary advantage to variable life insurance is its potential for higher returns than a universal policy due to its investments in different accounts. You also have the ability to adjust both premiums and death benefits according to your needs.