Universal life insurance is a type of permanent coverage that provides both a death benefit and cash values that grow over time. Unlike whole life policies, universal life provides advantages like flexibility in premium payments and the ability to be more involved in investment options.
Universal life can be used as one part of a comprehensive financial strategy due to the tax-deferred (tax-sheltered) savings. There are three types of universal life: standard, indexed, and variable. With so many options to choose from, it can be difficult to figure out which universal life insurance policy is best for you.
We researched over 25 insurance companies and reviewed them for financial strength, policy options, customer satisfaction, and pricing to find all the information you need to decide which policy is best.
Best Overall : John Hancock
Founded in 1862, John Hancock has a financial stability rating of A+ (Superior) from AM Best and is part of Manulife Financial, one of the largest insurance companies in the world. Among the unique features offered by John Hancock is its innovative approach to life insurance. Most notably, it is the only insurer of the top 25 we researched to provide fitness trackers and health incentives like premium reductions to reward healthy lifestyles of active policyholders. These unique features are why we named John Hancock the best overall.
John Hancock has many options for universal life insurance and a survivorship universal life policy, as well. The John Hancock universal policies offer guaranteed death benefits and cash values that you can borrow from. The cash values carry different investment options based on your plan selection.
John Hancock was the first insurer to offer discounts based on leading an active lifestyle through the Vitality program. There is also a Quit Smoking Incentive, which gives smokers a non-smoking rate for three years, and a special program for diabetics called John Hancock Aspire. John Hancock offers several riders including critical illness and long-term care.
In order to get quotes for John Hancock’s universal life policies, you must speak with a financial advisor and will have to complete a questionnaire or medical exam. John Hancock scored below average in the J.D. Power 2020 U.S. Life Insurance Study. It is worth noting that they offer post-purchase premium reductions through the Vitality program. With a low level of customer complaints with the NAIC and a vast range of universal life options, John Hancock provides solid solutions for anyone to explore when shopping for universal life.
Read the full review: John Hancock Life Insurance
Best for Guaranteed Interest Rate : Guardian
Guardian Life was founded in 1860, offering life insurance nationwide. Guardian has the highest available ranking of A++ (Superior) for financial strength by AM Best. Guardian Life offers many types of life insurance, including universal life and variable universal life plans. What sets Guardian apart from many other universal life insurance providers is the guaranteed interest rate option on the universal life plan, which allows you to choose an option with fewer risks than competitors that offer no guarantees on the investment portion of the plan. Guardian's guaranteed interest rate is why we named the company our runner-up.
Guardian Life is one of the few companies that offer coverage for higher risk applicants, such as those with serious medical issues. Guardian’s rates for smokers were also good when we reviewed pricing compared to other insurers.
Pricing from Guardian performed below average in the 2020 J.D. Power Life Insurance Study. However, the company has a very good track record for low complaints with the NAIC.
Read the full review: Guardian Life Insurance
Best for Strategic Investments : Northwestern Mutual
Northwestern Mutual is the largest insurer for individual life insurance in the U.S., offering services through wealth management advisors, financial advisors, and insurance representatives, depending on your needs. In business since 1859, Northwestern Mutual is a top-ranked insurer in several areas, including financial stability, with an AM Best rating of A++ (Superior). The company rates highly in customer satisfaction, taking fourth place in the J.D. Power 2020 U.S. Life Insurance Study. It also has an excellent record with the National Association of Insurance Commissioners (NAIC).
Northwestern Mutual offers the widest selection of life insurance policies in general among all the companies we reviewed. The company's policy options include two categories of universal life (UL) insurance: Single Premium Universal Life and Custom Universal Life.
Among the advantages in the Northwestern Mutual plans, customers can grow cash values tax-deferred, choose varying premium payment schedules, and adjust the death benefit. Riders are also available for Northwestern Mutual policies, but they vary depending on the plan you select and state you are in.
The Northwestern Mutual universal life options can be complicated to navigate on your own but offer a lot of customization in premium payments, death benefit, or cash value growth options. These adjustments can have an impact on the policy value, which makes it a good choice for people interested in using life insurance as an investment vehicle or estate planning tool and who are interested in working with a financial advisor to maximize the benefits of the investment portion of the policy. This ability to maximize cash value growth by working with an advisor is why we named the company our best choice for strategic investments.
Read the full review: Northwestern Mutual Life Insurance
Best for Young Families : MassMutual
Founded in 1851, MassMutual is the fourth-largest life insurer in the U.S. It has an impressive AM Best rating of A++ (Superior). The company offers both universal life and variable universal life policies.
Universal life insurance policies from MassMutual include both a guaranteed death benefit option and cash values. Your universal life plan with MassMutual is customizable, with flexible premium options that allow you to shift some of the cash value in the policy to pay your premiums, or you can pay more into the cash value when you have more cash available.
Mass Mutual also offers a variable life insurance option with the ability to allocate funds to an investment account or a Guaranteed Principal Account (GPA).
MassMutual is the only insurer we found that offers a free life insurance policy for children as part of their commitment to corporate social responsibility. The program is called LifeBridge and is available to families or guardians of children who fit certain criteria, one of which is a maximum family income of $40,000. MassMutual's free coverage for children and premium flexibility are why we named them best for young families.
Read the full review: MassMutual Life Insurance
Best for Retirees : Mutual of Omaha
Mutual of Omaha was founded in 1909 and offers multiple policies with simplified underwriting, which promises the potential of no medical exam based on the answers to a medical questionnaire and underwriting. It has a financial strength rating of A+ (Superior) by AM Best. Mutual of Omaha took the fifth-best out of a long list life insurers by J.D. Power in their 2020 study. It also has below-average levels of complaints with the NAIC. The company's positive customer service ratings and lack of medical exams are why we named it our best option for retirees.
Mutual of Omaha offers three universal life insurance plans including:
- AccumUL Answers: Guarantees a 2% annual interest rate.
- Life Protection Advantage: The indexed universal life plan, with a guaranteed death benefit through age 85
- Income Advantage: Offers a guaranteed death benefit and guarantees that you will not lose interest when the market drops below zero due to downside protection (0% interest guarantee).
For seniors, or people heading into retirement, Mutual of Omaha’s universal life policies provide advantages to help budget, protect cash values, and secure life insurance later on in life, including a guaranteed issue universal life option.
Read the full review: Mutual of Omaha Life Insurance
Best Value : New York Life Insurance
New York Life Insurance is the third-largest life insurance company in the U.S. and has an AM Best financial strength rating of A++ (Superior). Founded in 1845, New York Life writes policies nationwide.
New York Life offers three different options for universal life insurance policies. Depending on the type of policy you choose, you can choose a guaranteed or adjustable death benefit, can accumulate cash values, and choose to adjust premium payments, depending on your needs.
New York Life’s universal life policies offer the option of choosing a policy with a guaranteed death benefit and level premiums, which is a great feature to help budget—and it's why we named the company the best value in this review. New York Life also offers a Variable Universal Life policy.
New York Life has over 12,000 professionals across the country. To get a quote, you will work with a local financial professional. J.D. Power rates New York Life Insurance sixth in a very crowded field of life insurers.
Read the full review: New York Life Insurance
What Is Universal Life Insurance?
Universal Life (UL) insurance is a type of permanent life insurance policy that offers cash value accumulation with an investment portion that can offer varying levels of return on policy structure and options. Universal life is different than term life because, in addition to the accumulating cash values, it pays a death benefit available for your whole life, rather than for a limited term.
What’s the Difference Between Whole Life and Universal Life Insurance?
Whole life and universal life are both permanent forms of life insurance that offer death benefit coverage for life, but they have a few key differences, such as how premiums are paid and the way cash values are managed, which impact the policy overall.
|Universal Vs. Whole Life|
|Whole Life||Universal Life|
|Guaranteed death benefit||Yes||No|
|Interest payments||Adjusted annually||Adjusted Monthly|
|Cash Value Growth Tax-deferred||Yes||Yes|
|Cash value interest rate dependent on market performance||No||Yes|
|Option to borrow money from the policy||Yes||Yes|
|Option to skip premium payments||Not usually||Yes|
|Increase or decrease death benefit amount||Not usually||Yes|
|Level premiums/ Fixed premium||Yes||No|
|Collects dividends (applicable only to mutual insurers offering participating life insurance policies)||Yes||No|
Can You Cash Out a Universal Life Insurance Policy?
There are two ways to obtain cash from a life insurance policy. One is to borrow money from the policy, leaving the death benefit intact. The other is to surrender the policy, which means you are giving up the death benefit and canceling your life insurance in exchange for money. The surrender charges on a policy and cash value of the policy will vary depending on the insurance company, terms of the plan, and how long you have had the policy in force.
When you sign up for a life insurance policy you should be provided with information about the terms of surrender (fees). You can also ask for the surrender cost index and review the details with your advisor to understand fully what you can expect.
What Are the Advantages and Disadvantages of Universal Life Insurance?
Universal life has several advantages for people who want to use their life insurance as part savings and part death benefit, but it also comes with some risks and notable disadvantages. Here's an overview of the pros and cons of universal life.
- Death benefit coverage for life
- Flexibility in premium payment options
- Cash value accumulation
- Flexibility in investment options of cash values
- Tax-deferred investment options or tax-free cash value growth
- Possibility of accessing cash values through a loan
- A good option to build savings
- Some plans offer guaranteed interest rates
- Some policies offer accelerated death benefits for critical illness or long-term care
- The death benefit may be depreciated if the policy is not managed properly
- Risk of losing money if market performance is negative
- Higher cost than term life due to the cash value contribution in premiums
- Requires a financial strategy to manage properly
- Premium payments are not level and may increase as you age
- No online quotes
- Cash values are not immediate and build over time
- Potential low rate of return compared to other investment strategies
What Are the Expected Costs of Universal Life Insurance?
You can expect to pay significantly more for universal life insurance than for term life insurance simply because the premium for term life is for a limited time and does not include and cash value growth or savings options.
The costs for life insurance will vary depending on:
- Your age
- The amount of coverage you choose for the death benefit
- What riders you add to the policy
- What your long-term growth objectives are
- Your health or the health history of your family
How We Chose the Best Universal Life Insurance Companies
We reviewed the top 25 life insurance companies in the U.S. by researching financial stability, customer service satisfaction, and the history of complaints with regulators to select the top life insurers. We then looked at each life insurer's product offerings, underwriting criteria, riders, and customer service options to find the ones offering the most complete product lines with the most advantages.
To select our top universal life insurers, we looked for companies offering options to protect your investments and flexibility in cash value management. Finally, to make the final cut, we researched the insurers offering the most living benefits or guaranteed death benefit options to rank our top picks for Best Universal Life Insurance.