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Universal life insurance vs. whole life insurance: Which is right for you?

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Oscar Wong/Getty Images

Life can be predictably unpredictable. We dream, we plan—and we hope for the best, because we never know what tomorrow will bring. Creating a financial safety net around your carefully laid plans in the event of your untimely death can help your family live on as you planned.

Life insurance is designed to provide that financial security for your loved ones after your death. However, types of permanent life insurance also have a bonus: the opportunity to build savings over time that you can use during your lifetime. Two popular permanent life insurance options include universal life insurance and whole life insurance. Comparing the two can help you discover the best option for you.

Universal life insurance: The flexible option

Life any form of life insurance, universal life insurance pays out a death benefit when you die. And, also like other permanent insurance policies, it can build cash value. The cash value component typically earns a market rate of interest, though insurers generally offer a guaranteed minimum interest rate. Deductions are taken from your cash value each month to pay costs associated with your contract. The contract's death benefit remains in-force, if there is sufficient cash surrender value after deductions.

The most unique feature that universal life insurance offers is flexibility in both the death benefit and premium payments.

Whole life insurance: The consistent option

Similar to universal life insurance, whole life insurance is a type of permanent life insurance that pays out a death benefit after the contract owner's death and cash value growth.

The uniqueness of whole life insurance lies in its consistency and predictability. It provides a guaranteed death benefit (as long as premiums are paid), a guaranteed fixed premium that never changes and guaranteed cash value growth. It also has the potential to receive dividends. While dividends are never guaranteed, they can be used to purchase additional insurance or to pay premiums, among other options.

Read more about Thrivent’s dividend history and record year in 2024

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Comparing universal life vs. whole life insurance

Let’s compare the features of these policies side by side. We’ll discuss the differences between these features:

Premiums: Flexibility vs. consistency

A premium is what you pay for coverage. With cash value policies, part of your premium goes toward your death benefit. Another portion goes toward building cash value in a savings account, which may grow on a tax-deferred basis.

  • Universal life: You have the flexibility to adjust the amount and timing of premium payments to fit your needs. This nimbleness allows you to build up cash value quicker or slow your contributions as your income fluctuates. (Although, if you stop or reduce your premiums and an amount called the "cash surrender value" is depleted, your contract might lapse and your coverage may end.)
  • Whole life: The premiums are guaranteed not to change, though you do have the option of paying them over your lifetime or within a limited time. Choosing the latter strategy means you could fully pay off your premiums before you retire.

How long will the life insurance cover last?

True to its name, permanent life insurance can last your entire life as opposed to a term life insurance policy in which the term would end at a specific point in time.

  • Universal life: The contract stays in force as long as it has cash value. However, coverage isn't guaranteed to last throughout your life. To ensure coverage remains in place, you may need to adjust your premiums due to interest rate fluctuations or increased insurance charges.
  • Whole life: Coverage is guaranteed and remains in effect unless you cash the policy in or stop paying premiums.

Cash value

Cash value is a living benefit—you can use the money while you're alive. It can be an important element of your financial strategy. Cash value can be used to cover required premiums or even taken as a distribution to supplement retirement income.

  • Universal life: The cash value account of universal life typically earns a fixed market rate of interest and changes over time. It generally also has a minimum guaranteed interest rate that the contract will not go below.
  • Whole life: Whole Life offers a guaranteed level death benefit with premiums that never change. In addition, the cash value in the contract is guaranteed to equal the death benefit upon maturity of the contract (age 121). While not guaranteed, dividends may be distributed over time and increase the cash surrender value.

Death benefit

The death benefit of life insurance is generally tax-free money that's paid out to beneficiaries when the policyholder of an in-force account passes away.

  • Universal life: You have the option to increase or decrease the death benefit while the contract is active, but will generally require underwriting. Notably, the death benefit is not guaranteed with universal life. If you stop or reduce premiums and deplete the cash value, your contract could lapse or end.
  • Whole life: Guarantees the death benefit, which will never decrease as long as premiums are paid. Dividends may be used to purchase paid up additions, which can increase your death benefit over time.


A dividend is money an insurance company distributes to eligible policyholders and is based on company performance. Not every insurer or contract offers dividends. You can receive dividends in cash or use them to pay premiums, purchase additional insurance, add to the cash value and minimize loan payments borrowed against the contract.

  • Universal life: Though universal life contracts may be eligible for dividends, they're generally not expected to be paid.
  • Whole life: These policies often pay dividends, but dividends are not guaranteed.

Loans or withdrawals

You can potentially access a portion of your cash value through loans or withdrawals tax-free.1

It's critical to remember that loans and withdrawals will decrease your death benefit and the cash value available to pay insurance costs. They may cause a contract to lapse or terminate without value.

  •  Both universal life and whole life polices allow for loans and withdrawals.

Surrender charges

Another way to access the cash value that builds up is through surrendering, or cashing out, your policy. Surrender charges are the fees that an insurer takes out of your cash value if you cancel your policy early.

  • Both universal and whole life insurance contracts may have these charges.

Universal life insurance vs. whole life insurance

Variables to consider
Universal life insurance
Whole life insurance

Flexible, though sufficient cash value must be available to cover monthly premiums costs.


Fixed, will not change.
How long coverage lasts
Lifetime, if cash value remains sufficient to cover monthly deductions.
Lifetime, if premiums are paid.
Death benefit
Fixed but can grow with paid up additions (dividends)
Cash value
Loans or withdrawals available
Eligible, but dividends are not expected to be paid.
Often pays dividends, but dividends are not guaranteed.
Surrender charges
Not typically
Generally less expensive than whole life.
Generally more expensive than universal life.

Why is universal life cheaper than whole life?

Whole life generally has higher premiums than universal life because whole life offers a guaranteed death benefit, the same predictable premiums and a fixed interest rate. Essentially, policyholders pay more to take on less risk.

When you might choose universal life over whole life

If you:

  • Want a generally more affordable permanent protection option.
  • Want the option to vary the timing and amount of your premiums.
  • Would like the ability to adjust the size of your death benefit.
  • Are comfortable with the risk that coverage that isn't guaranteed to last throughout your life if you aren’t able to pay premiums or deplete cash value.
  • Plan on regularly monitoring your policy to ensure it remains in good standing and retains sufficient cash value to cover monthly insurance costs.

When you might choose whole life over universal life

If you:

  • Seek coverage that is guaranteed to last throughout your life.
  • Want the predictability of premium payments that will never change.
  • Are looking for cash value growth that isn't subject to market risk.
  • Want the potential to receive dividends.
  • Want a policy you don't have to keep a close eye on.
  • Are comfortable purchasing coverage that likely costs more than universal life.

Get guidance on the type of life insurance right for you

When you decide the time is right to purchase life insurance, you'll discover there are a wide variety of policies to choose from. Connect with a local financial advisor to gain personalized insight into the insurance options that can best suit your needs and budget.

1The primary purpose of life insurance is the death benefit protection. Loans and withdrawals will decrease your death benefit and the cash value available to pay insurance costs. Loans and/or withdrawals may cause a contract to lapse or terminate without value. Surrenders may generate an income tax liability and may be subject to a surrender charge. A significant taxable event can occur if a contract lapses with an outstanding loan. Contact your tax advisor for further details. Loaned values may be credited at a lower rate than unloaned values.

Dividends are not guaranteed.

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.

Guarantees based on the financial strength and claims paying ability of Thrivent.

The life insurance contract may have exclusions, limitations and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer. Riders are optional and available for an additional cost.

Under current tax law [IRC Sec. 101(a)(1)], death proceeds are generally excludable from the beneficiary's gross income. However, death proceeds may be subject to state and federal estate and/or inheritance tax.

Investing involves risk, including the possible loss of principal. The prospectus and summary prospectuses of the variable universal life contract and underlying investment options contain information on investment objectives, risks, charges and expenses, which investors should read carefully and consider before investing. For information on Thrivent products, see