Advan, Disadvantages of Adjustable Life Insurance?


Adjustable life insurance, also known as flexible premium adjustable life insurance, is a type of permanent life insurance that offers policyholders the flexibility to adjust various aspects of their policy as their needs and circumstances change over time. This type of insurance can be an attractive option for individuals seeking both lifelong coverage and the ability to tailor their policy to meet changing financial goals. However, like any financial product, adjustable life insurance comes with its own set of advantages and disadvantages. In this article, we will explore the key benefits and drawbacks of adjustable life insurance to help you make an informed decision.

Advantages of Adjustable Life Insurance

Flexibility in Premium Payments

One of the primary advantages of adjustable life insurance is the flexibility it offers in premium payments. Policyholders can increase or decrease their premium payments based on their current financial situation. This can be particularly beneficial during times of financial uncertainty or when the policyholder’s income fluctuates. For example, if you experience a temporary financial setback, you can reduce your premium payments to maintain the policy. Conversely, if your financial situation improves, you can increase your premiums to build more cash value.

Adjustable Death Benefit

Adjustable life insurance policies allow policyholders to modify the death benefit amount. This means you can increase the death benefit if your coverage needs grow due to significant life events such as marriage, the birth of a child, or the purchase of a home. On the other hand, if your coverage needs decrease, you can reduce the death benefit to lower your premium payments. This flexibility ensures that your life insurance policy remains aligned with your evolving financial responsibilities and goals.

Cash Value Accumulation

Similar to other types of permanent life insurance, adjustable life insurance policies build cash value over time. The cash value component grows on a tax-deferred basis, which means you won’t pay taxes on the growth until you withdraw the funds. Additionally, you can access the cash value through policy loans or withdrawals, providing a potential source of funds for emergencies, education expenses, or retirement. The ability to build and access cash value can enhance your overall financial planning and provide a safety net for unforeseen expenses.

Potential for Investment Growth

Some adjustable life insurance policies offer the option to allocate a portion of your premiums to investment accounts. These accounts can include various investment options such as stocks, bonds, and mutual funds. The potential for investment growth can result in higher cash value accumulation and a larger death benefit over time. However, it’s important to note that investment options come with their own risks, and the performance of the investments will impact the policy’s overall value.

Lifelong Coverage

As a type of permanent life insurance, adjustable life insurance provides lifelong coverage as long as the premiums are paid. This ensures that your beneficiaries will receive a death benefit regardless of when you pass away, providing financial security and peace of mind for your loved ones. This is in contrast to term life insurance, which only provides coverage for a specified period and may leave you without coverage if the term expires and you are unable to renew the policy.

Disadvantages of Adjustable Life Insurance

Higher Premiums

One of the main disadvantages of adjustable life insurance is the higher premiums compared to term life insurance. Since adjustable life insurance offers lifelong coverage, cash value accumulation, and the flexibility to adjust premiums and death benefits, the cost of maintaining the policy is typically higher. For individuals seeking affordable coverage, term life insurance may be a more cost-effective option.


Adjustable life insurance policies can be more complex than other types of life insurance due to the various options and features available. Understanding how to manage and optimize the policy requires careful consideration and ongoing attention. Policyholders need to be aware of how changes to premiums, death benefits, and investment allocations can impact the policy’s performance and overall value. For some individuals, this complexity may be overwhelming and require the assistance of a financial advisor.

Potential for Policy Lapse

The flexibility to adjust premium payments can also be a potential drawback if not managed properly. If you reduce your premium payments too much or for an extended period, the policy’s cash value may not be sufficient to cover the cost of insurance and other policy fees. This can result in the policy lapsing, which means you would lose coverage and any accumulated cash value. It’s important to monitor the policy regularly and ensure that it remains adequately funded to avoid a lapse.

Investment Risks

While the option to invest a portion of your premiums can provide the potential for higher returns, it also introduces investment risks. The performance of the investment accounts can be affected by market fluctuations, and poor investment performance can negatively impact the policy’s cash value and death benefit. Policyholders need to carefully consider their risk tolerance and investment strategy when opting for investment-linked adjustable life insurance policies.

Surrender Charges

Adjustable life insurance policies often come with surrender charges if you decide to cancel the policy or withdraw a significant portion of the cash value within the first few years. These charges can reduce the amount of cash value you receive and may make it less attractive to surrender the policy early. It’s important to review the policy’s terms and conditions to understand the surrender charges and how they may impact your decision to access the cash value or cancel the policy.


Adjustable life insurance offers a range of benefits, including flexibility in premium payments, adjustable death benefits, cash value accumulation, potential for investment growth, and lifelong coverage. These features make it an attractive option for individuals seeking a customizable and permanent life insurance solution. However, it’s important to weigh these advantages against the potential drawbacks, such as higher premiums, policy complexity, potential for policy lapse, investment risks, and surrender charges. By carefully considering your financial goals, risk tolerance, and long-term needs, you can determine whether adjustable life insurance is the right choice for you. Consulting with a financial advisor can also provide valuable guidance in making an informed decision about your life insurance options.


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