What Type Of Life Insurance Incorporates Flexible Premiums And An Adjustable Death Benefit?

Everyone wants a customized life insurance policy, and with an adjustable life insurance policy, now it is all possible.

Life insurance provides financial security for individuals and their loved ones. Among the various types of life insurance policies available, one option offers flexibility and customization: life insurance with flexible premiums and an adjustable death benefit. This article explores the features and benefits of this type of life insurance, which caters to individuals seeking adaptable coverage to meet their changing needs.

Flexible premium life insurance allows policyholders to modify their premium payments within certain limits, making the policy more affordable and sustainable over time. This flexibility proves valuable during transitions, unforeseen expenses, or when reallocating funds to other priorities.

Furthermore, life insurance policies with an adjustable death benefit provide the option to modify the coverage amount paid to beneficiaries upon the insured’s death. By tailoring the death benefit, policyholders can ensure that their life insurance coverage remains relevant and sufficient throughout different stages of life.

Combining flexible premiums and an adjustable death benefit empowers individuals to optimize their life insurance coverage to suit their unique financial circumstances and goals. By examining different life insurance policy factors that incorporate flexible premiums and an adjustable death benefit, people can make informed decisions when selecting life insurance options that best meet their present and future needs.

Universal Life Insurance

As mentioned, a universal life insurance policy offers flexibility in premiums and death benefits. This means that policyholders can adjust their coverage amount and manage their premiums over time. However, it is important to note that a minimum premium payment is required to maintain the policy.

A universal life policy has two main components: the Cost of Insurance (COI) and the saving component.

 Image Source: Canva
Image Source: Canva

The COI represents the minimum premium that must be paid. It covers various administrative charges, mortality rates, and other policy-related expenses. The specific amount of the COI depends on factors such as the chosen policy type and the insured person’s age.

The saving component, also known as the cash value component, accumulates over time through interest earnings. It is worth noting that the saving component can also impact the COI. The performance of the market plays a significant role in determining the returns on this investment portion. If the market performs poorly, the accumulated funds may be at risk of losing value.

Adjustable Life Insurance

Adjustable life insurance is a type of insurance that combines features of both term life insurance, providing policyholders with flexibility and customization options. It allows individuals to adjust various policy aspects to suit their changing needs better.

One of the key features of adjustable life insurance is the ability to modify policy features. Policyholders can adjust the duration of protection, the face amount (the death benefit), the premiums, and the length of the premium payment period. This means individuals can tailor their coverage to major life events or financial circumstances.

Another crucial component of adjustable life insurance is the cash value account. Like other permanent life insurance policies, adjustable life insurance includes a savings component accumulating cash value over time. The cash value account earns interest, typically at a guaranteed rate. Policyholders can use this cash value for various purposes, such as borrowing against it or withdrawing funds.

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Unlike other life insurance products, adjustable life insurance eliminates the need to cancel or purchase additional policies as circumstances change. Instead, policyholders can make adjustments to their existing policy within certain limits. For example, if someone gets married and has children, they may choose to increase the face amount of the policy to provide more financial protection for their family. On the other hand, someone experiencing financial constraints may opt to reduce their premiums to fit their budget.

When making changes to the policy, certain factors come into play. Increasing or decreasing premiums, face amounts, or the length of the premium payment period can be done relatively easily. However, increasing the face amount may require additional underwriting, particularly for significant increases, which could involve a thorough medical evaluation.

It’s important to note that any adjustments made to the policy will affect the guaranteed period of the interest rate and the cash value schedule. These changes may have implications for the overall coverage and the growth of the cash value account.

Flexible Cash Value and Premiums Provided by Adjustable Life Insurance

Adjustable life insurance provides policyholders with flexibility in terms of cash value and premiums. Unlike other life insurance policies, adjustable life insurance policies include a separate cash value component that grows based on the premiums paid. The cash value will increase faster if you contribute more than the required premiums. This cash value can be utilized to partially or fully pay the premiums, allowing for flexibility in payment amounts over time.

For instance, during times of financial hardship, such as a family member’s death, you can pay the minimum premium set by the insurer for a certain period and then resume regular payments once the situation improves. Conversely, many individuals pay higher premiums in the policy’s initial years to accelerate the cash value growth.

The cash value in an adjustable life insurance policy grows based on the interest rate determined by the insurer’s financial portfolio. While there is a guaranteed minimum annual interest rate, the cash value can experience even higher growth if the insurer achieves positive market performance. The accumulated cash value in the policy can serve different purposes.

  • Surrender Value: If you cancel the policy, you can surrender the death benefit and receive the cash value in return. However, the cash value will be subject to taxable gain.
  • Policy Loan: You can borrow money from the insurer using the cash value as collateral. The interest rates on policy loans are typically low.
  • Premium Payments: The cash value can be used to pay part of all the premiums required to keep the policy active. It’s important to note that the policy may lapse if the cash value reaches zero.

Index Account Option in Adjustable Life Insurance

Adjustable life insurance with an indexed option operates similarly to a standard adjustable life policy. Still, the cash value’s growth is tied to a specific index’s performance. The interest rate associated with the policy will increase or decrease based on how well the chosen index performs during a given period.

Indexed accounts allow you to allocate the cash value to different sub-accounts, with each insurer offering its selection of indexes, such as the Nasdaq-100 and Russell 2000. Indexed life insurance generally provides higher potential returns than whole life insurance but also carries the risk of growth if the underlying index performs poorly.

What does the term “7702 plan” refer to?

The term “7702 plan” refers to permanent life insurance policies, including flexible premium adjustable policies, that comply with section 7702 of the tax regulations for life insurance. These policies are designed to be tax-advantaged, with features such as tax-free death benefit distributions. Section 7702 establishes criteria to differentiate genuine life insurance. Products from other investment vehicles seeking to exploit the tax benefits associated with life insurance.

Is it possible to modify the death benefit in an adjustable life policy?

Adjustable life insurance provides the flexibility to adjust the death benefit based on your changing coverage needs. If you want to increase the death benefit, you might need to undergo a medical examination and pay higher premiums, especially for substantial increases. Conversely, if you choose to decrease the death benefit, it could result in lower or even no premiums if the cash value has grown enough to cover the policy.

Image Source: Maya on Money
Image Source: Maya on Money

For instance, let’s say your children have become financially independent and no longer rely on you for support. In such a situation, you may find that a large death benefit is unnecessary. With adjustable life insurance, you can decrease the face amount, aligning the coverage with your specific needs and potentially reducing ongoing payments.

How does adjustable life insurance differ from other types of life insurance?

Adjustable life insurance sets itself apart from other life insurance policies through its customizable nature, allowing you to tailor the policy to your needs and adjust it according to your financial requirements. Here’s a comparison of adjustable life insurance with other commonly known insurance products.

Adjustable life vs. whole life insurance

Compared to adjustable life insurance, whole life insurance offers less flexibility. Whole-life policies provide a fixed interest rate determining the policy’s cash value growth. Even if the insurer’s portfolio performs exceptionally well, you will only receive the predetermined fixed interest rate.

In contrast, adjustable life insurance allows for potential gains if the insurer’s performance exceeds the minimum interest rate. However, when the insurer performs poorly, the interest rate for adjustable life insurance could be lower than the guaranteed rate provided by whole life insurance.

Whole life insurance can be advantageous if you prefer a simpler product with relatively lower premiums. These policies come with fixed premiums that remain constant over time, offering reassurance to individuals who seek life insurance without the concern of changing policy costs in the future.

Adjustable life vs. variable life insurance:

While both adjustable life and variable life insurance are forms of permanent insurance, they differ primarily in how the cash value grows. As mentioned, adjustable life policies have a minimum interest rate, but the actual growth rate can be higher based on the insurer’s financial performance.

On the other hand, variable life insurance links the interest rate to the investment options you select from the insurer’s offered categories, which may involve stocks, bonds, treasury bills, and other securities.

Variable life insurance typically lacks a guaranteed minimum interest rate, making it possible to experience an interest rate close to zero or significantly lower than that of adjustable life insurance. This makes variable life insurance a relatively riskier investment than more stable policies like whole and adjustable life insurance.

What are the advantages and disadvantages of adjustable life insurance?

Adjustable life insurance offers several benefits that can make it an appealing choice. On the other hand, there are some drawbacks attached to it as well. The following table highlights some of the pros and cons of adjustable life insurance.

 Image Source: ESDS
Image Source: ESDS
Pros Cons
Flexibility to adjust policy components based on changing coverage needs. Generally, higher premiums compared to term life insurance.
Ability to increase coverage premiums and policy face value when needed (e.g., starting a family). The complexity of policy features and options may require additional understanding and research.
Adjusting premiums based on the financial situation offers flexibility in payment amounts. Cash value accumulation may be slower compared to other investment options.
Overfunding during the early years can allow for cash value growth to be utilized for future premium payments. Policy lapses if the cash value drops to zero, potentially resulting in loss of coverage.
Potential for cash value growth based on the insurer’s financial performance. Additional underwriting and higher premiums may be required for significant increases in coverage.
It can provide protection and cash value benefits similar to permanent life insurance policies. Requires ongoing financial commitment to maintaining the policy.

The price range of Universal Life Insurance

Universal life insurance rates vary based on age. Below is a breakdown of the average costs for a guaranteed $1 million universal life policy, applicable to both males and females in good health.

 Image Source: Canva
Image Source: Canva
Age Male Female
30 $3,943 $3,539
35 $4,741 $4,246
40 $5,956 $5,262
45 $7,026 $6,128
50 $9,035 $7,891
55 $11,368 $9,769
60 $14,647 $12,660

Note: Sample rates have been extracted online, courtesy of Forbes Advisor.

Best Universal Life Insurance Companies 2023

Looking for a universal life insurance policy can be challenging and time-consuming. So many companies exist today and have expertise in customizing policies according to their customer’s needs. We have compiled a list of the best universal life insurance companies.

All you have to do is head to their website and see what they offer. Tell them precisely what you require, and they will help you the best way they can.

Which companies offer the most superior adjustable life insurance policies with flexible premiums?

When searching for life insurance policies with flexible premium options, it is important to consider companies that provide a wide range of choices. These companies offer the flexibility to customize your coverage according to your needs.

State Farm

State Farm is a highly regarded insurance company, rated A+ by A.M. Best and AA by S&P. It earned a top position in the J.D. Power 2021 U.S. Life Insurance Study, scoring 822 out of 1,000 points.

 Image Source: CNET
Image Source: CNET

State Farm offers adjustable life insurance through three policy types:

  1. Universal Life Insurance
  2. Survivorship Universal Life Insurance
  3. Joint Universal Life Insurance.

All of these policies feature flexible premiums. The coverage can be tailored to your requirements, with options available for lifetime coverage periods and maximum purchase age of 85.

The coverage starts at $25,000, $100,000, or $250,000, depending on the chosen policy. Additionally, the policies offer tax-deferred cash value access during the policyholder’s lifetime as long as the premiums are paid.

Northwestern Mutual

Northwestern Mutual is another reputable insurer, rated A+ by A.M. Best and AA+ by S&P. It secured third place in the J.D. Power 2021 U.S. Life Insurance Study. Northwestern Mutual’s flexible premium adjustable life policy, Custom Universal Life (CUL) Accumulator Permanent Universal Life, is available for lifetime coverage periods with a minimum coverage starting at $500,000.

 Image Source: JDRF
Image Source: JDRF

This policy is exclusive to Northwestern agents and covers individuals aged 18 to 85. Like other policies, it offers tax-deferred cash value access and cash value entitlement upon policy cancellation or surrender. Additional benefits include a waiver of premium rider.

Mutual of Omaha

Mutual of Omaha, with an A+ rating from A.M. Best and an A+ rating from S&P, secured the fifth spot in the J.D. Power 2020 U.S. Life Insurance Study. It offers the most flexibility among the mentioned companies.

 Image Source: New Horizons Insurance Marketing
Image Source: New Horizons Insurance Marketing

Mutual of Omaha provides three policies with coverage starting at $100,000:

  1. Life Protection Advantage SM
  2. Income Advantage SM
  3. AccumUL Answers.

The Life Protection Advantage and Income Advantage SM policies offer downside protection, ensuring policyholders receive at least 0% if the market dips below that. The AccumUL Answers policy accumulates cash value with guaranteed minimum interest rates of 2% annually.

The cash value can be used for loans or specific needs through riders, and some policies allow the surrender of a portion of the cash value. The death benefit is paid as a lump sum and can be used to purchase a single-premium immediate-use annuity. Various riders are available for additional coverage.


 Image Source: LifeQuote
Image Source: LifeQuote

Prudential, rated A+ by A.M. Best and AA- by S&P, offers different types of universal life insurance policies with flexible premiums. The policies include:

  1. PruLife Essential UL
  2. PruLife SUL Protector (Survivorship Universal Life)
  3. Indexed Universal Life (IUL)
  4. Variable Universal Life (VUL).

These policies allow flexible premiums, with coverage starting at $25,000 and available up to age 90. Death benefits can be received as a lump sum or in installments based on the policyholder’s needs.

Prudential offers several riders to enhance coverage, such as living needs benefit, accidental death benefit, and enhanced cash value rider. However, it’s worth noting that Prudential does not provide any discounts for bundling its life insurance with other products, and their rates tend to be higher compared to other insurers.

Can I access the cash value in a Flexible Premium Adjustable Life Insurance Policy?

A flexible premium adjustable life insurance policy includes a cash value component that typically increases over time. While the policyholder is alive, they can borrow against or withdraw a portion of the cash value. This can be done to cover significant expenses such as college tuition or a down payment on a house.

It is generally advised to consider cashing in a universal life insurance policy after it has been in force for around 15 years. At this point, a substantial amount of cash value has typically accumulated, making it more advantageous to utilize. This accumulated money can also be used to settle any remaining premiums, relieving the policyholder of future payment obligations.


Searching for a life insurance policy can be tiring, particularly when presented with options that don’t align with your requirements. It is crucial to have an insurance company tailor a policy that suits your specific needs. What makes this even better is the inherent flexibility such a policy offers.

Universal life insurance allows for adjustments, allowing individuals to select their premium rates, coverage amounts, investment options, and more. Universal life insurance is your ideal choice if you seek a policy that truly reflects your preferences.

Sandra Johnson

Sandra Johnson

Sandra Johnson was a few years out of school and took a job as a life insurance agent in California, selling coverage door-to-door for Prudential. The experience taught her about the technical components of insurance and its benefits for individuals and society, as well as the misunderstandings people often have about insurance. She has over ten years’ experience in the insurance industry, having worked as both a Broker and Underwriter, assisting clients across a broad range of industries. At Insurance Noon, Sarah diligently gathers all the required information and curates up pieces to provide meaningful insurance solutions. Her personal value proposition is to demonstrate a genuine interest in always adding value for clients.Her determined approach to guiding clients has turned her into a platinum adviser to multiple insurers.

Insurance Noon is the world's leading source of insurance related content on the web, focusing on industry news, buying guides, reviews, and much more.