Permanent and Universal Life Insurance: What to Review

Separate the main structures

Whole life generally pairs scheduled premiums with contractual guarantees. Universal life can allow adjustments to premiums or death benefits within the contract, with insurance charges and account values affecting how it stays in force. Confirm the structure and guarantees of the specific product rather than treating permanent policies as interchangeable.

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Understand flexibility and funding

Ask what payment is planned, what payment is required to maintain a guarantee, and what happens if values or crediting are lower than illustrated. The minimum amount accepted for a payment may not be enough to sustain the intended coverage. An in-force illustration helps examine an existing policy’s current assumptions.

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Do not assume all cash-value risks are alike

Different permanent products can use different crediting or investment arrangements, costs and guarantees. Request a clear explanation of which party bears each risk. Compare guaranteed values separately from any non-guaranteed projections; past results and illustrated rates do not establish future values.

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Review loans and exit options

Ask about interest, surrender charges, withdrawals, reductions in benefits and tax consequences before accessing values. A policy that lapses or is surrendered with debt may create taxable income even when little cash is received. Review changes with appropriate insurance and tax advice before acting.

Read next: Life Insurance Cash Value: Loans, Withdrawals, Taxes, and Repayment

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Continue exploring

• Term Life Insurance for Physicians
• Whole Life Insurance for Physicians: Benefits and Tradeoffs
• Term vs. Whole Life Insurance: Benefits, Costs, and Family Protection
• Whole, Universal, and Indexed Universal Life: A Physician’s Comparison