Adjustable Life Insurance

Adjustable life insurance (commonly used interchangeably with universal life insurance) is a form of permanent life insurance that combines lifelong death benefit protection with a flexible premium structure and an interest‑bearing cash‑value account. It’s designed for people who want permanent coverage but need the ability to change policy features as their financial situation or life needs evolve.

How it works

• Permanent coverage continues so long as the policy remains funded to cover the cost of insurance.
• Premiums are flexible: you can change the amount or frequency of payments within limits set by the insurer. You must at least cover the underlying cost of insurance and policy charges.
• Cash value accumulates from premiums and interest. Growth depends on credited interest rates, which can vary year to year and are generally modest.
• You can access cash value via withdrawals or policy loans (loans accrue interest and reduce the death benefit if unpaid). You can also use cash value to cover future premiums.
• Major changes (for example, increasing the death benefit) may require underwriting or a medical exam.

What can be adjusted

• Premium amount and payment frequency (subject to minimums and insurer rules)
• Cash value (you can add, withdraw, or borrow against it)
• Death benefit (increase or decrease; increases often require underwriting; decreases usually do not)

Advantages

• Flexibility to tailor premiums and death benefit as circumstances change
• Lifelong coverage potential
• Cash-value accumulation that can be borrowed against or used to pay premiums
• Useful for people who expect variable income or changing insurance needs

Disadvantages

• Higher cost than term life insurance
• More complex to manage—insufficient funding can cause premiums to rise or the policy to lapse
• Cash-value interest is typically modest; other investments may offer higher returns
• Overfunding or improper premium patterns can jeopardize the policy’s favorable tax treatment (insurer limits and tax rules apply)

Policy rules and riders

• Tax and contract rules determine how a policy must be structured to keep preferred tax treatment; insurers normally set parameters to prevent violations.
• Common optional riders include waiver of premium, accidental death, accelerated/terminal illness benefits, and long‑term care riders.
• Review rider availability, costs, and how riders affect coverage and cash value before adding them.

Who should consider adjustable life insurance

• Individuals who want permanent death benefit protection plus access to a cash‑value account
• People with variable income who need flexible premium options
• Those comfortable monitoring policy funding and responding to changes in policy performance or insurer charges

Who might prefer something else:
* People seeking the lowest possible death‑benefit cost for a set term (term life is usually cheaper)
* Investors seeking higher returns and not needing insurance benefits (separate investments may offer better returns)

Key takeaways

• Adjustable (universal) life offers lifelong coverage, adjustable premiums, and a cash‑value account.
• It provides flexibility but requires active management; insufficient funding can cause lapses or higher future premiums.
• Cash value can be borrowed or used to pay premiums, but interest and policy charges affect growth.
• Check insurer rules, rider options, and tax implications before choosing a policy.