Adjustable life insurance is a type of permanent life insurance that allows you to adjust your policy’s coverage death benefit amount, premiums, and premium payment period.
Adjustable policies can offer life insurance coverage until you die and come with a cash value account that earns interest. Adjustable life insurance is sometimes referred to as universal life insurance or flexible premium adjustable life insurance.
What is adjustable life insurance?
Adjustable life insurance is a permanent life insurance policy that offers lifetime coverage and a cash value account. What makes adjustable life insurance unique among types of permanent life insurance is that it also has premiums and coverage amounts that can be changed.
There are three key elements you can change in an adjustable life insurance policy:
Cash value. You can increase the cash value of the policy by increasing your premium payments — and you can decrease the cash value by using it to pay premiums or withdrawing funds.
Death benefit. You can increase or decrease your coverage as your needs shift. A large increase may require additional underwriting and increase your premiums, while a decrease will lower your premiums.
Premiums. You can modify the amount or frequency of premium payments, above a minimum set by your provider.
Adjustable life insurance can be a good option for people who want flexibility in a permanent life insurance policy.
For example, if you’re expecting a child, you can increase your death benefit.
If you’re out of work, you can decrease your premiums to fit your budget.
On the other hand, there are some limitations to how much you can adjust your policy. For example, your insurer sets a minimum premium payment to comply with IRS tax regulations. 
If you consistently lower your premiums and deplete your cash value, your policy could lapse.
How does the cash value of an adjustable life insurance policy work?
The cash value in a life insurance policy works as a tax-deferred savings account that can earn a small amount of interest. This account is different from the death benefit. Part of your monthly or annual premium payments goes toward the cash value of the policy, so the cash value will grow over time as you make more payments and the account accumulates interest.
Your cash value growth also changes based on the financial performance of your insurer’s portfolio.
The cash value of an adjustable life insurance policy can be used in multiple ways:
It’s important to keep an eye on your cash value spending. If you use up the cash value and can’t afford your premiums, you’ll lose your policy.
Depending on which type of policy you have, the cash value account may not be guaranteed to earn interest.
Universal life policies will have a guaranteed minimum rate above 0%.
Indexed universal life policies will have a floor of 0% to protect you from losses and a capped upside return.
How much does adjustable life insurance cost?
It’s difficult to determine an average rate for adjustable life insurance. The standard average cost of life insurance already differs based on your health, age, and lifestyle. With an adjustable policy, the premiums can change over time. Since the premiums for adjustable life insurance are flexible, how much you’ll pay will be based on your specific policy choices.
Because coverage is permanent, you can expect the initial premiums to be higher than those of a term life insurance policy. On average, permanent life insurance costs five to 15 times more than term life insurance with the same death benefit amount.
If you think adjustable life insurance is for you, it’s best to connect with a licensed advisor who can give you an accurate estimate.
How does adjustable life insurance compare to other types of life insurance?
An adjustable life insurance policy is just one of many types of life insurance to consider when purchasing coverage. Here’s how it compares to other common types of life insurance:
Term life insurance: Unlike adjustable life insurance, term life policies only offer coverage for a set period — usually 10-30 years, after which few people still need insurance coverage — and have no cash value. As a result, policies are significantly cheaper.
Whole life insurance: Like an adjustable policy, whole life offers permanent coverage and a cash value. However, you can’t change your whole life premiums or death benefit. This makes it harder to maintain a whole life insurance policy, especially if you’re on a budget.
Variable life insurance: Variable policies also offer lifetime coverage, but you can’t make policy adjustments. The cash value is also invested differently than in an adjustable policy. With variable life, you do get to choose from a range of investment options offered by your insurer, such as stocks and mutual funds.
Is adjustable life insurance worth it?
Adjustable life insurance policies are not worth their cost for most people.
Most people don’t need the features it offers and they will get a better rate of return from a traditional investment account. Purchasing a term life insurance policy and investing the cost difference is generally a better choice financially.
As a life insurance sales agent, I would only advise people to consider variable life insurance in extremely rare cases.
High-net-worth individuals: If you regularly max out your other tax-deferred investment accounts, the cash value of an adjustable life policy is another way to build retirement savings. Consult with a financial advisor to see if it fits your financial goals.
Parents of children with special needs: If your child or another family member needs lifelong financial support, then it makes sense to have a plan to provide for them no matter when you pass away.
Survivorship life insurance policies: Joint survivorship policies (usually sold to spouses) cover two people and pay out after both pass away. They are usually used to benefit a lifelong dependent or create an inheritance for the beneficiary
Work with an independent broker like Policygenius to find a policy that’s right for your family’s needs.