Adjustable life insurance

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If you’ve ever looked into buying a life insurance policy, you may have discovered that there are multiple types of insurance available. Determining the best policy for your own circumstances can take time and research, but it’s worth knowing that you are covered with a policy that is right for your needs and life circumstances.

One type of insurance you may have encountered is adjustable life insurance. This article explains this type of policy: what it is, how it works and the pros and cons of having an adjustable life policy.

What is adjustable life insurance?

As the name suggests, adjustable life insurance allows you some flexibility that you would not find with other policy types. You can change the premium and the cash value contained within the policy and even tweak the death benefit. Because of this, adjustable life insurance is often referred to as flexible premium adjustable life insurance or adjustable term life insurance.

Adjustable life is a type of permanent life insurance, and as such, it continues for as long as you pay the premiums — in most cases, until your death. At that time, your beneficiaries receive a payout known as a death benefit.

Unlike term insurance, there is no end date to adjustable life insurance, and the policy builds up a cash value that represents a portion of your premium that is placed in a savings vehicle by your insurer. If you decide you no longer need insurance and surrender your policy, you will receive a portion of that cash value, minus administrative fees.

How does adjustable life insurance work?

When you purchase an adjustable life policy, premiums are determined based on your age, health and other factors. By paying into an adjustable life insurance, you are assured a death benefit to be paid to the beneficiary of your choice. In addition, you gain a portion that your insurer invests on your behalf, earning you a small amount of interest. This is called the cash value.

Flexible premiums in adjustable life insurance

As the cash value grows, you can choose to put it towards your premiums. This can be useful if your employment lapses and you’re able to use the cash value to sustain payments in the interim. However, if the cash value drops to zero and you cannot pay the premiums, you would have to surrender the policy.

You can also borrow money from the cash value, which under certain circumstances can be quite useful. If you don’t touch the cash value, it will gradually increase and may allow your premiums to be entirely paid from the cash value, giving you a policy that requires no additional financial maintenance to sustain itself.

Who needs adjustable life insurance?

Adjustable life policies are a good choice for anyone who wants more than the typical amount of flexibility over their policy. If you predict that your need for a death benefit will change over time, an adjustable life insurance policy allows you to increase or decrease the death benefit as necessary. If you increase the death benefit, you may need to undergo additional underwriting, but a decrease could effectively reduce your premium costs.

As a type of permanent insurance, adjustable life is also a good fit for specific policyholders. If you are the parent or guardian of a person with disabilities and want to ensure that they are cared for throughout their life, permanent life insurance is a great option because it lasts for the duration of your lifetime, ensuring ongoing protection.

Permanent insurance is also worth considering if you are a high-wealth individual looking for ways to diversify your earnings through a range of savings vehicles. An adjustable life insurance policy can allow for modest growth in a tax-deferred savings account, and can play a role in a comprehensive strategic financial plan.

Pros and cons of adjustable life insurance policies

Adjustable life insurance policies are not ideal for everyone. If you just need a simple, inexpensive policy that features a death benefit for a period of time when it’s most needed, you may be better served with a term policy.

The main benefit to adjustable rate policies is the flexibility, which makes it easy to negotiate a changing financial landscape while ensuring that your loved ones are provided for in the event of your death. Although they are more expensive than term policies, this may be offset by the advantages over the long term.

Pro Con
Allow you to account for changes in your financial situation More expensive than term insurance.
Can increase or decrease the death benefit as your circumstances change Modest amount of interest earned: higher rates of return can be found by investing elsewhere
Cash value accumulates over time; can be borrowed from and used to pay premiums Fluctuating variable interest rate of cash value, depending on the market
Continued benefits throughout the life of the policyholder, as long as premiums are paid

What is the average value of an adjustable life insurance policy?

The value of an adjustable life insurance policy will vary greatly depending on the amount of death benefit, as well as characteristics of the person who purchased the policy — such as age, health, whether they are a smoker and other factors.

Adjustable life — as a type of permanent insurance — will always cost more than term insurance, which does not have a cash value and is only viable for a defined period of years. For example, CNN estimates that a term policy for $500,000 would cost an average of $430 a year for a 35-year-old man, while a permanent policy for the same amount would be roughly $4,400 annually.

Frequently asked questions

What is the best life insurance company?

There is no one company that is “right” for everyone. An effective strategy when shopping for life insurance is to gather quotes from several companies and compare them to find the best option for your own circumstances. Our Best Life Insurance Companies of 2020 is one such place to compare providers.

Is adjustable life insurance the same thing as universal life insurance?

In many ways, yes. Both types of policy allow you to use your cash value to pay premiums, and both feature cash value components that are invested at rates that are determined by the insurer. Both types also allow you to adjust the death benefit — although increasing may require you to go through additional underwriting.

Is adjustable life insurance the cheapest type of insurance I can buy?

No. Term life insurance will almost always be the most inexpensive type of policy you can buy. Term and permanent are the two major types of life insurance policy, but permanent policies — which are characterized by a cash value component and lack of term limit — are generally five to ten times as expensive as term.

Written by
Mary Van Keuren
Insurance Contributor
Mary Van Keuren has written for insurance domains such as, and for the past five years, specializing in home and auto insurance. She has also written extensively for consumer websites including and Prior to that, she worked as a writer in academia for several decades.