When shopping for a life insurance policy, adjustable life insurance stands out as a flexible and customizable option that adapts to a policyholder's changing needs throughout their lives. This unique form of insurance combines elements of both term and permanent life insurance, offering a greater level of versatility than traditional policies.
Adjustable life insurance allows you to modify key aspects of your coverage as your financial situation and life circumstances evolve. Whether you're a young professional starting a family, a mid-career individual reassessing your financial goals, or someone approaching retirement, adjustable life insurance provides the opportunity to fine-tune your coverage without the need to purchase an entirely new policy. Let’s explore this type of coverage so you can learn if it’s right for you.
How does adjustable life insurance work?
Adjustable life insurance operates on a principle of flexibility, allowing policyholders to adjust certain aspects of their coverage over time. This type of policy combines features of both permanent and term life insurance, creating a hybrid that can be tailored to changing life circumstances. Adjustable life insurance policies start with a base permanent life insurance component, which includes both a death benefit and a cash value accumulation feature. What sets adjustable life insurance apart is the ability to modify several elements:
Death Benefit: Policyholders can increase or decrease the death benefit amount as their financial obligations change.
Premium Payments: The frequency and amount of premium payments can be adjusted within certain limits.
Policy Length: The duration of coverage can be extended or shortened.
Cash Value Accumulation: The policyholder can adjust how aggressively they want to build cash value.
These adjustments typically require underwriting approval, especially when increasing coverage. The cash value component grows tax-deferred and can be accessed through loans or withdrawals, providing a potential source of funds during your lifetime. By offering this level of customization, adjustable life insurance aims to provide a long-term coverage solution to align with the policyholder's changing needs, from milestones like family expansion to retirement planning.
How does adjustable life insurance differ from a standard policy?
While standard policies typically come in two main forms—term and permanent (such as whole life insurance)—adjustable life insurance blends elements of both, offering a coverage solution with customizable features. The key differences include:
Flexibility: Unlike standard policies with fixed terms and coverage, adjustable life insurance allows policyholders to modify key aspects such as death benefits, premium payments, and policy duration.
Adaptability to Life Changes: Standard policies remain static, whereas adjustable policies can evolve with the policyholder's changing needs, from career advancements to family expansions.
Cash Value Growth: While some standard permanent policies offer cash value accumulation, adjustable policies often provide more control over how aggressively this component grows.
Premium Variability: Standard policies typically require consistent premium payments, but adjustable policies may allow for varying payment amounts and frequencies within certain limits.
Underwriting Requirements: Adjustments to an adjustable policy may require additional underwriting, unlike standard policies that remain unchanged after the policy initially goes into effect.
Complexity: Adjustable policies are generally more complex than standard options, requiring a deeper understanding of insurance mechanics and more active management. Working with an insurance broker can help you understand the ins and outs of more complicated policies like adjustable life insurance.
Find the Policy That’s Right for You With SelectQuote
Whether you’re interested in adjustable life insurance or still exploring other coverage options, our licensed insurance agents can help. We have nearly 40 years of experience helping people find the right coverage for their needs. The process is quick and easy—in just minutes, we’ll gather unbiased quotes from several of the nation’s most highly trusted carriers all in one place.
