Universal life vs. term life insurance

Discover the difference between universal and term life insurance. Compare policies and choose the option that best serves your needs.

Universal life is a type of long-term life insurance that can provide lifetime protection and build cash value with tax advantages. With universal life insurance, you have the flexibility to adjust the amount and frequency of your premium payments (within limits), and even adjust your policy’s coverage to keep pace with your financial goals. The policy's cash value has the potential to grow, tax deferred, to help address future goals, such as college funding, retirement income, and more. Accessing the cash value will reduce the available cash surrender value and death benefit.

What are the types of universal life insurance?

• Universal life insurance provides long-term protection with flexible premiums and offers fixed interest rates that may help accumulate cash value over time. Increasing the amount or frequency of your premium payments enhances your opportunity to build cash value.
• Variable universal life insurance provides long-term life insurance protection provides long-term protection with flexible premiums and offers exposure to the markets through a wide range of investment options that may help grow the policy's cash value over time.²

Consider universal life insurance if you’re looking for:

• Protection for a longer period than is available with typical term insurance.
• The opportunity to accumulate cash value that can be used as your needs change in the future.
• Flexible premium payments, within limits.

What are the different types of term life insurance?

Many families count on term life insurance for temporary protection at a cost that may be easier to work into a budget than longer-term coverage that comes with other benefits. It’s typically used to cover a period in which a financial safety net is particularly needed, such as when your loved ones or your business rely on you the most.

To find the right product, start by thinking about your needs and how long you’ll want protection to be in place.

• Yearly Renewable Term may be the right choice if you want protection for a short, defined period or if you may want to convert to a permanent policy soon. Premiums generally start out lower than those for a level premium product, but they increase each year.
• Level Term is good if you want level premiums for 10, 15, or 20 years. After the level premium period that you select ends, premiums will increase annually.

Universal life vs. term life Insurance

Advantages of universal life insurance:

• Long-term coverage for a lower premium than you would generally pay with permanent life insurance policies.
• Cash value accrual is tax-deferred.
• Premium payment amounts can be adjusted down (within limits and if there is enough cash value to keep the policy from lapsing).
• Flexible death benefits.

Who should buy universal life insurance? 

Universal life insurance products are usually for people who are looking for the most long-term coverage they can get for the price of the premium. They should be willing to monitor their policy periodically with their agent/financial professional to ensure that it stays on track. Many older people looking to convert their term insurance policy to longer-term coverage choose universal life because they may be looking for longer-term death benefit protection. It is for people who ...

1. Want long-term coverage.
2. Don’t mind regularly monitoring their policy with their financial professional.
3. Would like the ability to customize their coverage both now and in the future.
4. Want coverage that lasts longer than most term insurance policies do.

Advantages of term life insurance.

Rather than taking a one-size-fits-all approach, we can create a combination of term life policies to build a portfolio that meets your specific needs. Since term life insurance comes in a variety of durations— typically from one to 20 years—it’s easy to match your coverage to your actual needs. Plus, you can convert some of your term coverage to permanent life protection if your plans change.

The benefits of a custom policy:

• Customize your coverage
  Build your portfolio to protect what’s most important to you—and for the length of time that protection is needed.
• Lock in an upgrade
  Lock in the ability to convert to permanent protection if your needs change over time, without additional medical exams.*

What makes a universal life insurance policy different from other long-term insurance policies?

Here are some factors to consider when comparing life insurance policies:

• Guarantee vs. flexible¹
  For many people, a guaranteed death benefit is the most important aspect of their policy. It means peace of mind for them—and their loved ones. For others, having the flexibility to adjust certain components of their policy, including premiums (within limits), is more important, even if it means the death benefit could fluctuate.
• Level of oversight
  With some kinds of life insurance, you can purchase a policy, put it away, and simply pay your premiums as they come due. With some universal life policies, though, you can make changes to your policy, including adjusting your premiums and coverage.² The flexibility of those policies can be very helpful if your circumstances change. It requires you to regularly review your policy, though, to ensure that it is properly funded and remains in force. Ask your financial professional about which type of universal life policy best meets your needs and objectives.

Consider a universal life insurance policy from New York Life for: 

• A long-term death benefit
• Flexible premium payments
• The potential to accumulate cash value

Related Resources

¹All guarantees of a universal life policy are based on the claims-paying ability of the issuer. 

²The return and unit value of a variable universal life poilcy will fluctuate . Variable universal life insurane is offered only by prospectus; the prospectus, containing more complete information about the policy, should be read carefully before investing.

*Guidelines for term conversions, such as timing, may apply; for example, there may be a ten-year conversion privilege for some products and a five-year conversion privilege for others. See the product factsheets or speak to your agent for more details.

In most jurisdictions, the form numbers are: Level Term (ICC22423-60P); Yearly Renewable Term (ICC22423-135P); Universal Life (ICC24-324-51P);  Variable Universal Life Accumulator II (ICC17-317-30). State variations may apply.

Products and features available in approved jurisdictions.