Why people choose universal life insurance:

Lifetime protection

From the first day the policy is in effect, UL can provide an income tax-free death benefit to help protect your family’s financial wellbeing.4 And as long as you keep a positive cash value amount, your coverage can’t be canceled.

Cash value

Like all permanent life insurance, it has a built-in cash value that grows over time and earns interest.5 You can take out policy loans against the cash value, use it to pay your premiums, or even use your coverage for cash to supplement your income in retirement.6

Flexible premiums

UL lets you raise or lower your payments within certain limits as your circumstances change. While you may eventually have to pay higher premiums to keep your coverage, that flexibility can make it easier to keep your insurance policy in force if your earnings vary.

Tax advantages

The policy’s cash value grows on a tax-deferred basis, so no taxes are owed on current earnings or interest. Also, the death benefit is paid income-tax-free to beneficiaries.

The flexibility and freedom of universal life also mean that there are fewer guarantees

In a whole life policy, the premiums, cash value growth, and death benefit are guaranteed not to change. With UL, all those things are designed to be flexible. However, the amount of premiums you pay affects cash value growth. And as you use funds from the cash value, it will affect the amount your family receives when you’re gone. It could even cause the policy to lapse, so you should stay in contact with your financial professional to help make sure your policy continues to meet your needs.

Checklist: Is universal life insurance right for me?

What I want:

What I should get:

I want life-long protection

Whole or universal life

I want to build tax-advantaged cash value

Whole or universal life

I want access to policy cash while I’m alive

Whole or universal life

I want the flexibility to raise or lower my premiums

Universal life insurance

I want affordable permanent coverage

Universal Life insurance

I want guaranteed cash value growth

Whole life insurance

I want a guaranteed death benefit

Whole or term life

I want guaranteed level premiums

Whole or term life

I want the biggest death benefit per premium dollar

Term life insurance


There are two parts to every premium payment


The cost-of-insurance component


The wealth-building component

The COI covers the cost of providing the death benefit and life insurance company administrative fees. It’s typically the minimum premium needed to keep the policy in effect, and the COI rises over time because it is based mainly on the policyholder’s age.

Any premiums paid over the COI amount add to the policy’s cash value, subject to an upper limit set by the IRS. Different policies calculate cash growth in different ways. With Guardian, the minimum interest rate is guaranteed never to be lower than 2% annually – and it can go higher.

Note that minimum premium payments reduce the accumulation of cash value. As COI rises over time, it can result in cash value erosion, to the point that the insurer may require higher premiums in later years to prevent coverage lapse. That’s why many people choose to build the cash value by paying maximum premiums for the first several years – then using those funds if needed to help lower premium costs later on.

How universal life insurance compares to other options



Universal Life Insurance

Whole Life 

Term Life 

Coverage period



Limited to a specific term (typically 10-30 years)


Can vary



Builds cash value

Yes, but not guaranteed

Yes, with guarantees







More expensive than term; but often less than whole life

More expensive than term

Less costly than whole life or universal life

Income tax-free death benefit




Investment options

Standard – No

Variable – Yes7


Guardian provides options; other companies may or may not


Primary uses

Death benefit for beneficiaries; tax-deferred asset accumulation; tax-advantaged wealth preservation and transfer

Death benefit for beneficiaries; tax-deferred asset accumulation; tax-advantaged wealth preservation and transfer

Death benefit for beneficiaries 

Want the opportunity for more cash growth? Consider variable universal life.

Variable UL gives you the same kind of lifetime protection and payment flexibility as standard universal life with more investment options: you can invest part or all of your cash value in “subaccounts” that are similar to mutual funds. However, you have to choose and manage investments as you would in a brokerage account. And as with a brokerage account, you also assume more risk, including the possibility of losing part or all of your principal. 

How to get universal life insurance

Universal life coverage can be a powerful financial tool that can help protect your family’s financial wellbeing for decades to come. It can give you the flexibility to help build assets, deal with life’s uncertainties, and even pass on wealth to the next generation. Each policy is tailored to the policyholder’s personal needs and financial strategy, and while premiums are flexible, a healthy 40-year old male should expect to invest about $8,000 a year for a $1,000,000 UL policy. But guidance is needed to arrive at the right solution for your needs. If you think this type of insurance is right for you, discuss your situation with an insurance professional or financial professional with life insurance experience. If you don’t know such a professional, ask a friend or colleague for a recommendation. Or, Guardian can connect you to a financial professional who can help. 

Frequently asked questions about universal life insurance

What are the benefits of universal life insurance?

Universal life is a flexible way to get a permanent life insurance policy and build cash value. The premiums are flexible: you can raise or lower payments within certain limits set by the insurance company. It can be a solution to cover people with variable incomes because the cash value also allows them to make withdrawals and policy loans.

What are the disadvantages of universal life insurance?

With more options than term or even whole life coverage, a UL policy can be complex. The policy needs to be managed: you need to determine how much you want to pay for premiums, and with variable UL, you also have to make investment choices. Those variables, along with a cost of insurance that increases over time, can affect and even detract from the value of your cash value. So you also have to keep an eye on your value balance over time: If it goes down to zero, your premiums could go up, or the policy may lapse.

What is the difference between whole and universal life insurance?

A UL policy gives the insured person many of the same permanent protection and benefits as whole life coverage, along with the added benefit of a flexible premium to help accommodate variable earnings. In addition, depending on the life insurance company and policy, you may also have the option to invest your cash value in a variety of market-based investment options, giving you the potential for more growth. On the other hand, universal life offers fewer (and/or lower) cash value guarantees. 

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This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial professional to understand what life insurance products are available for sale.

1 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.

2 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.

3 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

4 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

5 Some life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial professional and refer to your individual life policy illustration for more information.

6 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

7 A Variable Universal Life (VUL) policy is considered both life insurance and a security and is sold with a prospectus. Premium and death benefit types are flexible. It’s crediting rate is based on the performance of the underlying investment options provided in the policy. There is no guaranteed interest rate. This type of policy may lapse due to low or negative performance of the underlying investment options, inadequate funding, and increasing cost of insurance rates. See your policy prospectus for more information.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker-dealer offering competitive investment products, as well as a registered investment adviser offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

Variable insurance products, their underlying investment options, mutual funds and ETFs are sold by prospectus only. Prospectuses contain important information, including fees and expenses. Please read the prospectus carefully before investing or sending money. You should consider the investment objectives, risks, fees and charges of the investment company carefully before investing. Please contact your investment professional or call 888-600-4667 for a prospectus, which contains this and other important information.

Annuities and variable life insurance issued by The Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware corporation. Individual variable annuities are distributed by PAS. GIAC is a wholly owned subsidiary of Guardian. Guardian, GIAC and PAS are located at 10 Hudson Yards, New York, NY 10001

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