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| Universal
life insurance vs. traditional whole life insurance | | Both
traditional whole life (WL) and universal life (UL)
products are examples of cash-value life
insurance. But there are several important differences between them. One relates to product
transparency.
In UL policies, it’s easy to look at the internal operations
of the policy and to
examine the relationships among various policy elements
(premiums, cash values, interest credits,
mortality charges, and expenses) and how they interact
with each other. Another difference is that
unlike whole life policies, universal life policy returns
were freed from long-term, fixed-rate
contracts and replaced with policies whose returns
were tied to short-term interest rates and
periodically adjusted. After the initial payment, universal
life allows you to pay premiums anytime,
in virtually any amount, subject to certain minimums
and maximums. You can also reduce or increase
the amount of the death benefit more easily than under
a traditional whole life
policy. |
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