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Adjustable Life Insurance: Pros and Cons

By Marty Navarro·April 03, 2023·5 Minute Read

In this Article

Adjustable life insurance is a type of permanent life insurance that offers flexible policy features. For example, you can change the premium payments, cash value, and coverage amount on adjustable life insurance policies.

What is Adjustable Life Insurance? 

Adjustable life insurance has two aliases: universal life insurance and flexible premium adjustable life insurance. Like most permanent life insurance policies, it comes with a cash value component that can potentially earn interest.

The thing that sets adjustable life insurance apart from other types of permanent life insurance is changeability — you can modify your policy's monthly premium, death benefit, and cash value while the policy is in force.

Here's how that works:

Adjustable life insurance premium: You can adjust the amount of your premium payment and how often you pay it (within your life insurance company's parameters). 

This can be a helpful benefit because as your life changes, you have the option to adjust your premium accordingly. For instance, if you found yourself between jobs, you could lower your monthly premium to better fit your budget.

Adjustable life insurance coverage amount: You can change the total amount of coverage on your adjustable life insurance policy. As your family grows, you might consider increasing your death benefit to help cover the cost of childcare or college tuition if you were to pass away. And when you pay off your mortgage (best day ever!), you may decide it is the right time to decrease the face amount of your policy now that your house is paid in full. 

One note: if you make an adjustment to your policy that results in a higher death benefit, you could be required to show proof of insurance for the additional coverage.

Adjustable life insurance cash value: If you increase your premium payment, you can also increase your policy's cash value. Similarly, you can decrease the cash value on an adjustable life insurance policy with a cash withdrawal or by using the cash value to pay your premium.

If you are considering buying life insurance with living benefits, it's important to note that not every permanent life insurance policy is guaranteed to earn cash value interest.

Pros of Adjustable Life Insurance 

Here are a few reasons one might consider adjustable life insurance:

  • If your financial situation changes, you have the freedom to adjust your premium amounts and how often you pay them.
  • You can borrow against your cash value or use it to pay your premium.
  • You can increase or decrease your policy's death benefit if you want less or more coverage.
  • When life changes come your way, you can adjust your policy accordingly rather than purchasing an all-new life insurance policy.

Cons of Adjustable Life Insurance 

Let's flip the coin and consider some possible downsides of adjustable life insurance.

  • You could pay more for adjustable life insurance than other types of life insurance. Term life insurance policies, for example, do not have a cash value feature and are less expensive than adjustable life insurance policies of the same coverage amount.
  • The interest earnings on life insurance policies may not be as significant as expected. It's a good idea to review the cash value details of any insurance policy with living benefits.
  • You have flexibility when it comes to the death benefit on adjustable life insurance policies, but raising your death benefit can also cause your premium to increase.

Adjustable Life Insurance vs. Other Types of Life Insurance  

Now that you know what adjustable life insurance is, let's see how it stacks up compared to other types of life insurance. 

Adjustable life insurance vs whole life insurance: Both whole life and adjustable life insurance offer permanent coverage and a cash value component. 

While adjustable life insurance is known for its flexibility, the same can't be said for whole life insurance. You cannot modify the premium and death benefit of a whole life insurance, which could be challenging if your financial situation changes over time.

Adjustable life insurance vs variable life insurance: Variable life insurance, like adjustable life insurance, provides coverage without an expiration date. However, you cannot adjust the premium or coverage amount of a variable life insurance policy once it is in force, and the attached cash value may seem more involved than that of adjustable life insurance.

Adjustable life insurance vs term life insurance: While term life insurance doesn't typically allow for policy modifications, it does offer some flexibility at the time of purchase. When you buy a term life insurance policy, you will choose the amount of coverage you want to purchase as well as the length of time your policy lasts.

One more difference — term life insurance doesn't have a cash value feature. Instead, it's simple, straightforward coverage with a lower price than adjustable life insurance.

Is Adjustable Life Insurance a Good Choice?

Adjustable life insurance policies tend to be more expensive than most other types of life insurance. However, whether or not the cost is worthwhile depends on your life circumstances

For example, suppose you care for a lifelong dependent you want to help financially protect when you pass away. In that case, an adjustable life insurance policy with cash value might be a good choice for you.

For some people, the higher cost of adjustable life insurance isn't worth its flexibility. Some financial advisors recommend term life insurance for this reason and a few more. 

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Term Life Insurance Made Easy

If you are considering term life insurance, Bestow makes it easy to apply. Once approved, you can select a term of anywhere from ten to thirty years and purchase a policy with coverage of up to $1.5 million. 

Start with a free, fast quote; if you like what you see, you can apply online in minutes. There is no medical exam or lengthy interview with Bestow. Instead, the application is a quick and easy questionnaire — and most people get a quick decision. Upon approval, rates start from just $11 per month, and you can lock yours in for the policy's entire term.

Bestow does not give financial or legal advice. The information provided is not intended to offer any tax, legal or financial advice. It is always a good idea to consult your tax, legal and financial advisors regarding your specific situation.

Key Takeaways

  • Adjustable life insurance is a type of permanent life insurance that typically comes with a cash value component. 
  • Adjustable policies can be modified while in force. For example, you can change the premium, coverage amount, and cash value of an adjustable policy.
  • People with life-long dependents may want to consider adjustable life insurance.