What is the difference between "whole life" and "universal life" insurance?

Whole life insurance and universal life insurance both serve as types of permanent life insurance, but they have distinct characteristics that cater to different needs and preferences.

Whole life insurance is designed to provide lifelong coverage with fixed premiums that do not change over time. It also builds cash value that grows at a guaranteed rate, thus offering predictability and stability. The cash value accumulates on a tax-deferred basis and can be accessed by the policyholder during their lifetime. This maturity and stability make whole life insurance a strong option for individuals looking for long-term financial security and predictable costs.

On the other hand, universal life insurance is more flexible. It allows policyholders to adjust both the premium payments and death benefit amounts over time. While it also accumulates cash value, the growth rate may vary based on interest rates and the insurer's performance, which adds an element of variation that is not present in whole life insurance. This flexibility allows the policyholder to manage their insurance according to changing financial circumstances or needs.

The correct choice highlights the characteristic of whole life providing guaranteed cash value while universal life is known for its flexible premiums, reflecting the central differences in structure and management between the two types of policies.