What Is Adjustable Life Insurance? (2024)

Adjustable life insurance is another name for universal life insurance, a type of permanent life insurance that grants you more control over your policy details. For example, you can adjust the schedule and amount of your premium payments, and increase or decrease your coverage amount. Like other types of permanent life insurance, an adjustable life insurance policy lasts your entire life and includes a cash value savings component that builds value over time.

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Pros and cons of adjustable life insurance

Pros:

  • Flexible premiums: With adjustable life insurance, you can lower your premium payments, and change the due date, or skip a payment altogether. This flexibility is helpful if you lose a source of income and need to shrink your premium payment to fit a smaller budget. Note that your policy's cash value will pay the difference between your original premium and the lowered premium amount. Therefore, you need enough accrued value before lowering your payment.
  • Adjustable coverage: You can increase or decrease your policy's death benefit, practical during certain life events. For example, if you have a child, you can bump up your coverage without taking out a brand-new policy. Likewise, you could reduce your coverage once your dependents become independent, i.e., they move out of the house.
  • Cash value builds: Your policy's cash value builds over time, giving you an extra financial resource. You can borrow against your life insurance policy's cash value, use it to pay your premiums, or possibly add it to your policy's death benefit (only some insurers allow this and for a significantly higher premium).

Cons:

  • Higher costs: Since you can change many aspects of an adjustable life insurance policy, they generally cost more than other types of life insurance. Certain changes, such as significantly increasing your death benefit, will raise your premium and require additional underwriting (meaning your insurer will reevaluate the cost of insuring you).
  • Restrictions apply: Your insurer may restrict when and how frequently you can adjust your policy. You generally can't change your policy on the fly. Check with your insurer to see what conditions you must satisfy before modifying your coverage amount, premiums, etc.
  • Variable interest rate: The cash value of an adjustable life insurance policy grows based on a variable interest rate that is tied to market conditions. So, your policy's cash value growth is less predictable than other types of permanent life insurance with a fixed interest rate, such as whole life. Learn about the differences between whole life and universal life insurance.

IS THERE A DIFFERENCE BETWEEN UNIVERSAL AND ADJUSTABLE LIFE INSURANCE?

There's no difference between the two. Your insurer may use one term instead of the other, but both refer to a permanent life insurance policy that includes adjustable features. Learn more about universal life insurance from Progressive Life by eFinancial.

Can you cash out an adjustable life insurance policy?

It's possible to "cash out/cash in" an adjustable life policy while still alive. However, your insurer may have restrictions on when you can do so. If your policy has a cash surrender value, then you can sell your policy back to your insurer in exchange for the accumulated cash value of the policy. Surrendering the policy effectively ends your coverage, forfeiting your policy's death benefit. You may also have to pay taxes on the cash value amount you receive.

The other way to cash out a policy is to take a loan against its value. Note that you must pay back the loan with interest; otherwise, the amount owed will be subtracted from your death benefit when you die. Learn more about cash value life insurance.

Is an adjustable life insurance policy right for me?

Adjustable life insurance makes sense if you want life insurance that lasts your entire life and offers more flexibility. Other types of life insurance essentially lock you into a specific coverage and premium amount for the policy's life. But with adjustable life insurance, you can change those elements of your policy to accommodate your ever-changing life circumstances.

Pro Tip:

In some states, Progressive Life Insurance Company offers a "flexible term" policy that lets you increase or decrease your coverage amount without reapplying.*

Consider these scenarios where an adjustable life policy would be beneficial:

  • Having a child: You can increase the coverage amount on your existing policy to cover the cost of raising your child, including everyday expenses and tuition.
  • Losing a job: If you're unemployed and have sufficient cash value, you can decrease your premium payment while job hunting.
  • Kids moving out: You could lower your coverage amount, and therefore your premiums, since your kids no longer depend on you financially.

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What Is Adjustable Life Insurance? (2024)

FAQs

What Is Adjustable Life Insurance? ›

Adjustable life insurance is another name for universal life insurance

universal life insurance
Universal life insurance, also called UL or adjustable life insurance, is also permanent and will last until you pass away if your premium payments are up to date. Unlike a whole life policy, UL includes features that allow you to adjust your policy.
https://www.progressive.com › answers › whole-life-vs-univer...
, a type of permanent life insurance that grants you more control over your policy details. For example, you can adjust the schedule and amount of your premium payments, and increase or decrease your coverage amount.

How does adjustable life insurance work? ›

An adjustable life policy allows a policy owner to make changes to the death benefit amount, adjust their payment on their premiums, modify the guaranteed protection or premium payment periods, and add money to or remove funds from their cash value.

Which is true about an adjustable life insurance policy? ›

Key Takeaways

Most adjustable policies allow you to decrease the death benefit. Some allow you to increase the death benefit, though you may need to go through health underwriting again. Adjustable life includes cash value and is permanent coverage that can last your entire life; there's no expiration date.

What are adjustable rates for life policy? ›

While a whole life insurance policy has a fixed premium that you'll pay for the rest of your life, an adjustable policy lets you alter your premium and death benefit. With whole life, returns on your cash value account are fixed, whereas with adjustable life, returns are influenced by current market rates.

What is the face amount of an adjustable life policy? ›

The face value is the dollar amount the beneficiary will receive, also known as the death benefit, plus any additional benefits your plan has. Then, premiums are paid to keep the plan active.

Can you cash out an adjustable life insurance policy? ›

It's possible to "cash out/cash in" an adjustable life policy while still alive. However, your insurer may have restrictions on when you can do so.

What type of life insurance gives the greatest amount? ›

Term insurance is initially cheaper than other types of policies that offer the same amount of protection. Therefore, it gives you the greatest immediate coverage per dollar.

What is the face amount of a $50,000 graded death benefit? ›

For example, with a $50,000 graded death benefit policy, the initial face amount may be $10,000 in the first year, then increase to $20,000 in the second year, and so on, until it reaches the desired coverage amount of $50,000.

What is the best kind of life insurance? ›

Whole life insurance may be the best type of coverage if you are looking for guaranteed support for your loved ones on any timeline.

Can you pay off a whole life insurance policy early? ›

If you're a whole life insurance policyholder, you might be wondering whether it's possible to completely pay off a whole life insurance policy. The simple answer is yes, it's possible.

What is the downside of an adjustable interest rate? ›

Could Cost More Long-Term. Despite the initial savings from the teaser interest period, interest rates could significantly increase over the life of your loan. In the long run, you could end up paying much more in interest than you would have with a fixed-rate loan.

Are adjustable rates worth the risk? ›

While there are some risks involved, there are also many benefits when using ARMs, particularly for short-term home buyers who may move before the interest rate resets, those planning to refinance their mortgage down the road, and for buyers with a strong and consistently reliable cash flow.

How long do adjustable rates last? ›

ARMs. Adjustable-rate mortgages are typically 30-year loans, meaning you'll pay back the money you borrowed over 30 years, with a rate that is fixed for an initial period. An ARM interest rate changes after the fixed period expires.

How does an adjustable life insurance policy work? ›

Most life insurance policies have a fixed death benefit and premium payments. Adjustable life insurance allows you to modify the death benefit and premium payments over the course of the policy. This type of life insurance may be a good option if you want the greatest amount of control over your policy.

Can you increase the death benefit on an adjustable life policy? ›

2. Death Benefit. The policyholder is allowed to increase or decrease the amount that is paid out. The increase of the amount may require additional evidence to reassess the risk of the policyholder, whereas a decrease may lower the premiums that are paid.

Which type of life insurance does not build cash value? ›

As a rule, term policies offer a death benefit with no savings element or cash value.

At what point does a whole life policy pay the face amount? ›

A guaranteed death benefit: The level of the death benefit (the amount paid to your beneficiaries) is guaranteed never to decrease. A guaranteed cash value: A cash value that is guaranteed to grow at a set rate each year until it is equal to the face amount of the policy at a specified age, typically age 100 or 121.

What is a disadvantage to a credit life insurance policy? ›

Potential Drawbacks of Credit Life Insurance

Premiums can be more expensive than regular life insurance: Since credit life insurance doesn't require a medical exam, the coverage could be more costly than traditional life insurance. If you're in good health, you might pay less by buying your own life insurance policy.

How does additional life insurance work? ›

Supplemental life insurance is extra coverage you can buy at work or through an organization. It can cost less than individual insurance, and you may not have to answer health questions. You could lose your coverage if you leave your job.

How does increasing life insurance work? ›

An increasing term life policy takes changes to inflation into account, meaning your payout amount rises alongside the inflation rate. With small sums of money and over brief periods of time, you might not notice the effect of inflation.

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