Is Universal Life Insurance Worth It?

Universal life insurance offers permanent coverage with cash value growth, but requires policy management. Here's how to know if it's worth it for you.

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Written by Mark Fitzpatrick

Updated: February 26, 2026

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Key Takeaways

Universal life insurance comes with flexible premiums and death benefits. It has cash value that grows based on interest rates or market performance.

This coverage works best for high-net-worth people planning estates, business owners with variable income or people needing lifetime protection with flexible payments.

Term life insurance costs less and covers most families' needs, while whole life guarantees cash value growth without universal life's management demands.

What Is Universal Life Insurance?

Universal life insurance provides permanent financial protection as long as you pay sufficient premiums to cover insurance costs and policy fees. The policy includes cash value that grows based on fixed interest ates, market index performance, or investment subaccounts you choose.

Your premium is split between insurance costs and cash value. You can adjust payments within limits set by the insurer and change your death benefit as needs evolve, subject to underwriting requirements. After the cash value accumulates, you can borrow against it, make withdrawals or use it to cover premiums.

Policy performance and premium requirements vary by insurer and individual circumstances. Consult with a licensed insurance professional to understand policy terms and conditions.

When Is Universal Life Insurance Worth It?

Whether universal life insurance fits your situation depends on your needs. This flexible permanent coverage provides the most value when you need adjustable premiums and long-term financial protection that can adapt to changing life circumstances.

You Have a Variable Income

Freelancers, business owners and commission-based workers benefit from adjustable premiums. You can pay more during high-earning months and reduce payments when income drops. Cash value covers insurance costs during lean periods.

You Need Lifetime Coverage for Estate Planning

High-net-worth people use universal life to transfer wealth. The death benefit bypasses probate and provides beneficiaries with tax-free cash. Variable universal life invests cash value in market-based accounts for growth that can offset estate tax liability.

You Want Investment Options With Insurance

Indexed universal life ties cash value to market indexes like the S&P 500. Variable universal life lets you choose investment subaccounts. These options suit people who are comfortable managing investments and who want higher growth potential than what whole life offers.

Indexed returns are capped. Variable universal life insurance involves investment risk, including potential loss of principal. Past performance doesn't guarantee future results.

You're Planning Business Succession

Universal life funds buy-sell agreements in partnerships. The death benefit lets surviving partners purchase a deceased partner's shares. Cash value provides supplemental retirement income or loan collateral for business needs.

You Need Coverage Beyond Term Life Periods

Term life insurance is usually available up to ages 65 or 70, depending on the policy. Universal life continues past those ages. Guaranteed universal life provides permanent coverage with level premiums and minimal cash value for people who need protection throughout their lives.

When Is Universal Life Insurance Not Worth It?

Universal life has limitations that make other coverage more suitable in many situations.

You Need Affordable Protection for a Set Period

Term life costs less and covers specific periods like working years or until children finish college. Most families need coverage during high-earning years when dependents rely on income.

You Want Guaranteed Growth

Whole life insurance guarantees cash value increases at fixed rates. Universal life cash value fluctuates based on interest rates or market performance. If growth falls short, you must increase payments to maintain coverage.

You Prefer Hands-Off Coverage

Universal life requires tracking cash value, adjusting premiums as costs increase with age and maintaining adequate funding. Whole life and term life need less oversight.

You're Approaching or in Retirement

The cost of insurance increases as you age, requiring higher premiums or cash value draws. Term life or guaranteed universal life with level premiums fit fixed retirement budgets better.

You Want Straightforward Coverage

Universal life includes multiple types, variable crediting methods and complex fees. Variable universal life adds investment decisions. Term life offers simple coverage with fixed premiums. Whole life provides permanent protection with guaranteed values.

How Much Is Universal Life Insurance?

Life insurance premiums vary based on age, health, coverage amount, policy type and how much you contribute beyond minimums. Younger, healthier people pay lower rates. Medical conditions, tobacco use, and family health history affect premiums.

Average monthly premiums for $500,000 universal life insurance policies for people with average health, height and weight:


25	$151 (F), $171 (M)	$277 (F), $312 (M)
30	$184 (F), $203 (M)	$338 (F), $370 (M)
35	$216 (F), $241 (M)	$395 (F), $439 (M)
40	$254 (F), $294 (M)	$463 (F), $536 (M)
45	$312 (F), $355 (M)	$567 (F), $646 (M)
50	$393 (F), $448 (M)	$714 (F), $815 (M)
55	$493 (F), $566 (M)	$897 (F), $1,028 (M)
60	$627 (F), $736 (M)	$1,140 (F), $1,336 (M)

These rates represent minimum premiums to keep policies active. Paying higher amounts builds cash value faster and helps prevent lapse as insurance costs rise with age. Rates shown are estimates based on MoneyGeek analysis of industry data and may not reflect current market rates. Actual premiums vary by insurer, health status, and policy features.

How to Decide If Universal Life Insurance Is Right for You

Evaluate your financial goals, income stability and willingness to manage policy performance. Universal life insurance works for people needing permanent coverage with flexible premiums or investment options. High-net-worth people use it for estate planning and business owners fund succession plans with it.

Choose term life for affordable coverage during specific periods, such as until your mortgage ends or children become independent. Choose whole life for permanent coverage with guaranteed growth if you prefer not to monitor policy performance. Consult a financial advisor to compare quotes and understand how fees affect returns before buying.

Frequently Asked Questions

Is universal life insurance a good investment?

Universal life is primarily insurance, not an investment. Caps limit growth on indexed policies and fees reduce returns. Financial advisors often recommend buying term life and investing the difference in retirement accounts for more control and potentially higher returns.

What happens if I stop paying universal life premiums?

The policy uses cash value to cover costs when you stop the premium payments. Once depleted, coverage ends. Some policies let you reduce the death benefit to lower costs and extend coverage.

Is universal life insurance better than whole life?

Universal life offers flexible premiums and death benefits with market-linked growth options. Whole life provides guaranteed increases and fixed premiums without active management. Universal life suits people who are comfortable with investments and want flexibility. Whole life works better for guaranteed values and predictable costs.

Also read: Universal vs. Whole Life Insurance

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. He has analyzed the insurance market for over five years, conducting original research for insurance shoppers. His insights have been featured in CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

He writes about economics and insurance, breaking down complex topics so people know what they're buying.

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