Adjustable life insurance is often referred to as a hybrid of term and whole life insurance. It’s permanent, provided premiums are paid, so you don’t have to worry about losing coverage as you get older. And it features a cash value component that can be used in the form of tax-free policy loans or even to pay insurance premiums. You can increase or decrease premiums and coverage amounts if your financial situation changes.
At Paradigm Life, we emphasize financial certainty and control through The Perpetual Wealth Strategy™—a proven approach that prioritizes guaranteed growth, liquidity, and long-term wealth-building. Before choosing adjustable life insurance, it’s important to understand how it compares to other permanent life insurance options and whether its built-in risks outweigh its benefits.
In this article, we’ll explore how adjustable life insurance works, its hidden costs, and how it stacks up against other permanent policies, helping you make the best choice for your financial future.
Permanent vs. Term Life Insurance: Understanding the Differences
Permanent life insurance provides lifelong coverage and a built-in cash value component, unlike term life insurance, which only lasts for a set number of years and does not accumulate cash value. While term life insurance is often seen as a low-cost option for temporary coverage, it does not offer the long-term financial benefits and wealth-building potential of whole life insurance.
With permanent life insurance, part of your premium goes toward the policy’s death benefit and administrative fees, while the rest is credited to your cash value, which grows over time. This guaranteed growth and liquidity make it a powerful tool for financial stability and wealth creation.
How Cash Value Enhances Your Financial Flexibility
One of the greatest benefits of permanent life insurance is its cash value, which can be accessed in multiple ways:
- Tax-free policy loans: Borrow against your cash value without triggering taxes or penalties.
- Withdrawals: Take cash out of the policy when needed (may be taxable depending on the amount).
- Paying premiums: Use accumulated cash value to cover policy costs.
The liquidity of cash value makes it an ideal resource for:
- Retirement income, supplementing other savings while avoiding market volatility.
- Funding investments like real estate or business capital.
- Paying for major life expenses like college tuition.
Estate Taxes and Legacy Planning
A permanent life insurance policy can be a critical estate planning tool. The death benefit is tax-free and avoids probate, ensuring your heirs receive their inheritance efficiently.
Additionally, whole life insurance can help reduce estate taxes, preserving wealth for future generations. High-net-worth individuals often use whole life policies to cover estate tax liabilities, preventing the need to sell off assets to settle tax obligations.
Why Universal Life Insurance Poses Risks to Long-Term Financial Security
When people refer to adjustable life insurance, they are typically talking about universal life insurance. This policy offers flexible premiums and the ability to adjust coverage, but its cash value growth depends on market performance and your insurer’s financial health.
At Paradigm Life, we believe in financial certainty, not speculation. That’s why we help individuals build wealth through The Perpetual Wealth Strategy™, which uses whole life insurance to provide guaranteed growth, stable premiums, and long-term financial security.
Before choosing an adjustable life insurance policy, it’s important to understand the risks associated with this type of coverage.
The Hidden Risks of Universal Life Insurance
1. Cash Value Growth is Unpredictable
- Your policy’s cash value is tied to your insurer’s financial performance, meaning gains are not guaranteed.
- If the insurer underperforms, cash value accumulation slows, affecting your ability to use it for policy loans or withdrawals.
2. Policy Loans and Withdrawals Can Be Risky
- Using your cash value to pay premiums or cover investments can cause your policy to lapse.
- Unlike whole life insurance, universal life policies do not always guarantee a stable loan structure.
3. Rising Premiums and Limited Coverage Flexibility
- Adjustable life insurance has the highest premiums among permanent policies.
- Your insurance company can increase premiums at any time, even if you haven’t adjusted your coverage.
- Some policies limit coverage changes, meaning reducing coverage may prevent you from increasing it again later.
4. Health Changes Can Impact Future Insurability
- If you need to increase coverage later, you may have to go through additional underwriting or medical exams.
- Changes in health can affect your ability to secure affordable coverage in the future.
While universal life insurance offers flexibility, it lacks financial predictability, making it difficult to plan for retirement income, wealth-building, or estate planning.
Why Whole Life Insurance is a Better Alternative
For individuals seeking guaranteed growth, stable premiums, and financial flexibility, whole life insurance provides a safer, more effective wealth-building strategy. Unlike universal life insurance, whole life offers:
- Guaranteed cash value accumulation that grows tax-efficiently.
- Fixed premiums that never increase, ensuring financial predictability.
- Tax-free policy loans that provide liquidity without market risk.
- A reliable way to supplement retirement income and protect against estate taxes.
Whole life insurance is the foundation of The Perpetual Wealth Strategy™, helping individuals build long-term financial stability without the risks of market-driven policies.
Adjustable Life Insurance vs. Variable Life Insurance: A Risky Choice?
While adjustable life insurance and variable life insurance may seem similar, they come with different levels of risk and uncertainty. Understanding these risks is key to choosing a policy that builds wealth, rather than one that exposes you to market fluctuations.
Risks of Variable Life Insurance:
- Market-dependent growth: Cash value is tied to investment performance, making gains unpredictable.
- No guaranteed rate of return: Unlike whole life insurance, variable policies do not offer guaranteed cash value accumulation.
- Higher fees: Administrative and management fees often reduce overall returns.
- Limited access to cash value: If investments underperform, borrowing against cash value can become risky.
Variable life insurance is typically best for individuals who have maxed out other investment options and are comfortable with market-based risk. However, for those seeking long-term financial certainty, a different solution is needed.
Why Whole Life Insurance is the Best Alternative
Whole life insurance offers the most guarantees and least risk compared to other types of permanent life insurance. It is designed for individuals who want stable growth, predictable cash flow, and financial security.
Key Benefits of Whole Life Insurance:
- Fixed premiums: Unlike adjustable or variable policies, whole life locks in premiums for life, making budgeting simple.
- Guaranteed cash value growth: The policy’s cash value accumulates at a predictable rate, unaffected by market volatility.
- Non-guaranteed dividends: The non-guaranteed dividends refers to policies underwritten by mutual insurance companies that may earn dividends, which can be used in various ways.
- Paid-up additions for faster growth: Dividends can purchase paid-up additions, increasing cash value and death benefits over time.
With whole life insurance, you don’t have to worry about market downturns, rising premiums, or unpredictable returns. Instead, you get a stable financial tool that supports wealth-building and long-term security.
COMPARING LIFE INSURANCE AT A GLANCE
| Adjustable Life | Variable Life | Whole Life | Term Life | |
| Premiums | Adjustable | Fixed/Adjustable* | Fixed | Fixed |
| Cash Value | Guaranteed* | Non Guaranteed | Guaranteed** | N/A |
| Duration | Permanent | Permanent | Permanent | Term |
| Policy Loans | Tax-Free | Tax-Free | Tax-Free | N/A |
| Withdrawals | Taxable | Taxable | Taxable | N/A |
| Death Benefit | Adjustable | Fixed/Adjustable* | Fixed† | Fixed |
| Cost | $$$$ | $$$ | $$$ | $ |
| Fees | $$$ | $$$$ | $$ | $ |
* Depends on policy/insurer
** Plus non-guaranteed dividends
† Can increase with paid-up additions
Choosing the Right Life Insurance for Long-Term Financial Security
Is Adjustable Life Insurance the Best Choice?
For most individuals, there are better alternatives to adjustable life insurance. While adjustable policies offer flexibility, they come with risks like increasing premiums, unpredictable cash value growth, and potential policy lapses.
If you’re looking for permanent coverage with cash value benefits, whole life insurance is typically the stronger choice. It provides:
- Guaranteed cash value growth, unaffected by market fluctuations.
- Fixed premiums, making budgeting simple and predictable.
- Paid-up additions, allowing you to increase coverage and build wealth faster.
- A reliable financial tool that supports estate planning, retirement income, and financial independence.
If additional temporary coverage is needed, you can pair whole life insurance with an affordable term policy, ensuring both short-term affordability and long-term financial security.
What If You Need Low Premiums?
For individuals seeking the lowest initial cost, term life insurance offers an affordable solution. While it doesn’t accumulate cash value or provide lifelong coverage, a convertible term policy allows you to transition into whole life insurance later, ensuring permanent protection as your financial situation improves.
When Might Adjustable Life Insurance Be an Option?
In rare cases, adjustable life insurance may be beneficial, such as for individuals with lifelong dependents (like children with special needs) but fluctuating income. However, even in these situations, it’s important to understand the risks associated with adjustable policies, including rising costs and uncertain cash value accumulation.
Secure Your Future with The Perpetual Wealth Strategy™
We can customize a policy to fit your financial situation. Our expert Wealth Strategists are available to answer your questions and show you customized illustrations, outlining an individual plan of action to help you achieve your goals.
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FAQS About Understanding Adjustable Life Insurance
What is adjustable life insurance, and how does its flexibility impact policyholders?
Adjustable life insurance is a type of permanent life insurance that allows policyholders to modify premium payments, death benefits, and cash value growth over time. This flexibility can help individuals adjust their policy based on changes in income, financial goals, or family needs. However, premium increases and uncertain cash value growth can create financial instability, making it important to carefully evaluate its long-term impact.
What are the advantages and risks of adjustable life insurance?
Advantages:
- Flexible premiums – Policyholders can increase or decrease payments based on financial needs.
- Adjustable death benefit – Coverage can be modified as life circumstances change.
- Cash value accumulation – Offers potential access to cash value through loans or withdrawals.
Potential drawbacks:
- Higher costs over time – Premiums can increase, making the policy expensive in the long run.
- Market-dependent growth – Cash value is often tied to insurer performance, leading to unpredictable returns.
- Risk of policy lapse – If cash value is used to cover premiums, the policy may terminate if funds are depleted.
How do you determine if adjustable life insurance is the right choice for your financial plan?
Before choosing adjustable life insurance, consider:
- Your long-term financial goals – Do you need guaranteed growth and financial stability, or are you comfortable with market fluctuations?
- Your risk tolerance – Can you handle potential premium increases and uncertain cash value accumulation?
- Alternative options – Would a whole life insurance policy with fixed premiums, guaranteed cash value, and paid-up additions provide better long-term benefits?
Is Adjustable Life Insurance Worth the Risk?
While adjustable life insurance offers flexibility, it comes with uncertain premiums, unpredictable cash value growth, and potential policy risks. For those seeking long-term financial stability, whole life insurance provides guaranteed growth, fixed premiums, and a reliable strategy for building wealth.
At Paradigm Life, we help individuals achieve financial certainty through The Perpetual Wealth Strategy™, ensuring their wealth is secure, accessible, and growing—no matter how the economy shifts.
Talk to a Paradigm Life Wealth Strategist today to explore a smarter, more predictable way to build lasting financial security.
