Life Insurance 101: What are the pros and cons of an adjustable life policy?
Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance.
Not only does he strive to provide you with the …
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Written by
Jeffrey Manola
Founder & Licensed Agent
Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs.
She has since used that knowledge in her more than ten years as a writer, largely in the insur…
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Reviewed by
Leslie Kasperowicz
Farmers CSR for 4 Years
UPDATED: Feb 13, 2022
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Facts You Should Know
An adjustable life policy is similar to a whole life insurance policy, but grows more cash value over time
Age, gender, occupational habits, and more affect your adjustable life policy rates
Companies that sell adjustable insurance include State Farm, AAA, Mutual of Omaha, and more
Unpredictable financial situations happen all the time, and your loved ones can be left responsible if you are not prepared. Thankfully, investing in a life insurance policy protects your family from bearing the financial burden if something happens to you.
If you are currently shopping around for a new life insurance policy, you have likely run into an adjustable life policy.
Adjustable life insurance is a popular permanent life insurance sold by most providers. However, understanding it can be difficult because there are many facets to an adjustable life policy.
This article will discuss what adjustable life insurance is, how it works, its pros and cons, and how it differs from other popular life insurance policies, like term and whole life insurance.
Are you looking to compare adjustable life insurance rates? Enter your ZIP code to get free life insurance quotes from companies near you today.
What is adjustable life insurance?
Also referred to as flexible life insurance, universal life insurance, or flexible premium adjustable life insurance, adjustable life insurance is what it sounds like. This policy works like other life insurance policies; however, the difference is that adjustable life insurance has an added benefit of adjustability depending on your financial situation.
Essentially, adjustable life insurance is a type of permanent life insurance policy with a few added benefits. Part of your monthly premiums covers the insurance cost with an adjustable life insurance policy, while the rest builds a cash value over time.
You can alter three aspects of your coverage throughout a flexible or adjustable life policy: the death benefit, premiums, and cash value. However, your provider will decide when and how often you get to make these changes.
One of the perks of an adjustable life policy is the modifiable cash value feature. The cash value will increase more quickly the more money you put into the policy. You can also use your adjustable life policy’s cash value to pay some or all of your rates, making your premiums flexible over time.
Another interesting feature is that the cash value grows based on the interest rate of your provider’s financial investments with an adjustable policy. Therefore, although there is a minimum annual interest rate, your cash value can grow at a higher interest rate if your provider’s market performance is positive.
Within your adjustable life policy, you can use your cash value in a few ways. For example, you may choose to use it as premium payments, a surrender value, or a loan payment.
You may also choose to adjust your death benefit over time. For instance, a significant decrease in your death benefit may result in lower monthly rates or reduce them to nothing if your cash value has grown enough to pay for the policy. However, if the increase is significant enough, you may face higher rates and an additional medical exam.
If you are unsure whether an adjustable life insurance policy is right for you, talk through your options with an insurance agent. Even one conversation can help narrow down your options to only the best companies and policies for you.
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How is adjustable life insurance different from other kinds of life insurance?
The nature of an adjustable life insurance policy is that it is customizable to fit your needs and can change at any time with your financial situation. This flexibility sets an adjustable life insurance policy apart from other popular life insurance policies, such as whole and variable life insurance.
Because they are similar in flexibility, it can be hard to differentiate adjustable life policies from variable life insurance or variable universal life insurance policies. However, their main difference is how cash value grows through each. Simply put, there is typically no minimum interest rate on cash value with a variable life policy. As a result, it is a lot riskier than an adjustable life policy with a minimum rate from which customers can expand if necessary.
Essentially, variable whole life insurance can be described as a permanent life insurance policy with death benefits, cash value, and fixed premiums that cover you for a lifetime or until the policy lapses.
A whole life insurance policy, on the other hand, offers significantly less adjustability than a flexible policy. Each policy shares similar aspects, such as cash value, but an adjustable policy changes interest rates. However, a whole life insurance policy is cheaper and offers more simplicity and stability than an adjustable life policy.
Naturally, an adjustable policy is very different from a term life insurance policy. With so many additional facets to an adjustable policy, it will be a lot more expensive than a term policy. Term policies cover you for a set amount of time and only include life insurance coverage without any additional aspects.
Straight life insurance is another type of permanent life insurance that many people choose for the convenience of its premiums. What type of premium does a straight life policy have? Straight life policies have fixed premiums that you pay until you pass away or until the policy is paid in full.
Because there are so many different options to choose from, be sure to research multiple companies and policies before choosing one. It is also helpful to talk through these options with your insurance agent to know that you are getting the best life insurance coverage for your needs.
What are the best adjustable life insurance companies?
Almost all life insurance companies sell adjustable life insurance in some form. Some of the top life insurance companies that offer an adjustable life policy include:
Mutual of Omaha
Northwestern Mutual
State Farm
AAA Life Insurance Company
Prudential
Before deciding on a policy, be sure to research your company of interest thoroughly. You may find that the coverage is not exactly what you need or that a company out there suits you better.
As a starting point, check out our Prudential Life Insurance Review for more specific information about the company, including policies, customer reviews, and more.
What are adjustable life insurance rates?
With an adjustable life policy, you pay for more than just life insurance. Therefore, you can expect adjustable life insurance rates to be a bit more expensive than a standard whole life insurance policy.
To better understand what you will pay for an adjustable life policy, look through the following table for average whole life insurance rates from one of the top companies listed above, State Farm.
As you know, with any insurance policy and company, a few things impact your life insurance rates. Some of the factors that life insurance companies will take into account when giving you an adjustable life policy quote include:
Gender
Your age
Overall health
Occupational risks
Dangerous hobbies
Smoking or drinking habits
Generally, the quickest and most effective way to find the cheapest adjustable life insurance rates is to compare quotes from multiple life insurance companies. Comparing a few different quotes gives you a better idea of what to expect to pay for life insurance and helps you get the most out of your policy.
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Adjustable Life Insurance: The Bottom Line
Adjustable life insurance is a good option for those that expect to have changing coverage needs in the future. As a permanent policy, a flexible or adjustable life policy allows you to accommodate your policy components depending on your unique financial situation or future goals.
Unfortunately, the biggest downside to an adjustable life policy is its cost. You will pay more for an adjustable life insurance policy than you will for a whole or term life insurance policy. The added expense comes from the convenience of modifying parts of the policy to fit your financial standing.
Variable life insurance is different from adjustable life because it offers the same benefits at a higher risk of collecting less interest on your cash value over time. However, variable life insurance also costs more than an adjustable life policy.
Many reputable life insurance providers offer adjustable life insurance, so comparing at least three will help you know which company has the best flexible life insurance policy for your needs. Comparing multiple companies will also help ensure that you get the cheapest life insurance rates. After researching companies, talk with your life insurance agent if you are still unsure.
Ready to start comparing adjustable life insurance rates? Enter your ZIP code into our free tool below for instant life insurance quotes from companies near you today.
