What characteristic differentiates whole life insurance from universal life insurance?

Whole life insurance and universal life insurance are both forms of permanent life insurance, but they have distinct characteristics that set them apart. The key differentiator for the correct choice focuses on the cash value accumulation and flexibility of premiums.

Whole life insurance is designed to provide a guaranteed death benefit along with a cash value component that grows at a predetermined rate set by the insurer. This cash value accumulation is a fixed aspect of whole life policies and provides stability and predictability for policyholders.

On the other hand, universal life insurance incorporates flexibility in several aspects, particularly the premiums. Policyholders can adjust their premium payments and even the death benefit amount, subject to certain conditions. This flexibility allows individuals to manage their policy in line with their financial situation or needs.

In summary, the distinguishing characteristic is that whole life insurance offers a fixed cash value accumulation feature, while universal life insurance provides the policyholder with the flexibility to adjust premiums and benefits, making it a more adaptable product for varying financial circumstances.