Whole life vs. universal life insurance

Whole life and universal life insurance have many similarities, and both are great options to help protect your family. The main difference is that whole life usually doesn’t change—many features are guaranteed for life—while universal life offers flexibility.

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What is the difference between whole life and universal life insurance?

You’re thinking about life insurance to protect your family. That’s great! The right policy can give you the peace of mind that comes from knowing your loved ones will be safe and able to maintain the life they are accustomed to should something happen to you.

We’ll be the first to admit that life insurance choices can be confusing. There are different terms and options and opinions. Don’t let that stop you. 

While there are dozens of names and ways to offer different life insurance policies, almost all fall into three basic categories:

  1. Term Life covers a set period of time 
  2. Whole Life offers guaranteed lifetime protection
  3. Universal Life offers a flexible long-term option

This article will cover the similarities and differences between whole life insurance and universal life insurance. 

Whole life is permanent, while Universal Life offers long-term protection.

With whole life, your premiums are fixed and guaranteed never to rise1. As long as you continue to pay them, you can count on the life insurance benefits being paid to your beneficiaries.  With universal life there are no fixed premiums and you have more flexibility on when you make payments. However, if the policy is not adequately funded, it could end. Additionally, the cost to keep the policy can go up significantly as you get older. Take that into account when you decide which is better for you.

Whole life insurance offers more stability.

Whole life has a guaranteed death benefit that will never decrease, as long as premiums are paid. Your family will always get the amount you set your policy for at minimum. There’s also the potential for dividends to increase the amount of coverage over time. Your premiums will also never change. For many, this reliability is the most important factor in their decision. 

Universal life insurance is more flexible.

Universal life offers more control, but it requires oversight and doesn’t have a guaranteed death benefit. You can adjust your policy, and even your premiums (within limits), as your life changes. Without adequately funding it, your policy can potentially end since the death benefit is not guaranteed, but universal life often gives you the most long-term protection for your dollar.

Both can build cash value. 

The cash value of a life insurance policy is an important way to save for the future, providing a safety net during life. You can borrow against the cash value of your policy to pay for unexpected expenses, allowing you to be better prepared for whatever lies ahead2. Whole life insurance offers guaranteed cash value build up over the life of the policy. Universal life insurance policies have the potential to accumulate cash value, but it can fluctuate over time based on how you fund the policy and other factors. 

Why choose whole life insurance?

Whole life insurance offers permanent, stable protection and access to cash value when you need it. It’s designed for someone who wants to “set it and forget it,” knowing their loved ones will be protected when they pass.

Premiums are guaranteed to never increase.

Once you customize your policy to the benefits and premiums that fit your situation, it’s set. You don’t have to do anything else, and you never have to worry about the cost increasing or the benefits changing.

Builds cash value.

With whole life, the cash value of your policy grows tax deferred. This valuable asset can be used whenever you need it, for whatever you choose. It can cover unexpected medical costs, provide additional income in retirement, or even be used for a grandchild’s college tuition. 

Has growth potential through dividends.

Dividends provide an opportunity for your policy to grow more over time. They can be used to pay premiums, add to the cash value, or even be taken as cash. Dividends are not guaranteed, but New York Life has paid them every year since 1854.

Related: Explore whole life insurance

Why choose universal life insurance?

Universal life insurance generally gives you the ability to fully customize your protection up-front and make adjustments down the road. It’s for those who want to be able to adapt their policy as life changes. 

Fits your needs now and in the future.

There are many ways to configure your universal life policy. You can design your coverage to last for as little as fifteen years, for your lifetime, or somewhere in between. You can adjust your premium payments as your income fluctuates and even increase or decrease your death benefit as your needs change over time. 

Lower premiums than permanent life insurance.

Universal life generally offers the most life insurance benefit for your dollar. This is mainly because the death benefit and cash value growth are not guaranteed, like they are on whole life. 

Related: Explore universal life insurance

Which is better, whole life or universal life?

That will depend on your circumstances and desires. If you’re still unsure which type of policy is best for you, it can help to speak with a financial services professional about the different ways insurance products and features can be combined. Our experienced agents can walk you through your options and help you build a strategy that is personalized to your family’s needs.


Want to learn more about life insurance? 

A New York Life financial professional can help determine what’s right for you. 

This helps us understand your immediate needs.


Want to learn more about life insurance?

A New York Life financial professional can help determine what’s right for you.

1Any guarantees of a policy are based on the claims-paying ability of the issuer.

2Accessing the cash value will reduce the available cash surrender value and the death benefit. Loans will involve interest payments. 

In Oregon the Policy Form Number for New York Whole Life Insurance is ICC18217-50P (4/18); the Form Number for New York Life Universal Life is ICC19-319 51P