Cash Value or Inflation?
Indexed Universal Life Insurance is a relatively new kind of life insurance product that provides a death benefit along with a cash value account that can be used either to pay premiums or take out loans and other benefits. With these benefits in place, it makes sense to look at what exactly this type of insurance is and how it works. This article will cover the basics of indexed universal life and offer some basic insight into this new life insurance offering.
One of the most important aspects of any life insurance policy is the premium payments. In indexed universal life there are guaranteed premium payments that do not fluctuate based on life situation. There is no change in premium payments every year like there would be with some other types of policies. That said, however, there are different ways to make sure that you get your money’s worth from your policy. Here are some things to remember when comparing an indexed universal life policy to other types of permanent life insurance protection.
First, remember that your premiums will never increase because of increases in your lifetime income or spending habits. With an indexed universal life insurance policy, the premium payments remain fixed for the entire life of the account. Also, your cash value grows according to the same set of rules as any other permanent life insurance policy. The only difference is that your investments grow instead of just remaining static like they would with a traditional permanent life insurance policy.
With indexed universal life insurance, there is also a fixed period within which your investment returns will occur. You can specify how long you want your return to be, so your returns can vary over the years rather than during your lifetime. When your initial term expires, your investments automatically cease to exist. However, as long as you maintain a healthy interest rate and withdraw money at the right time, you can use the cash in your account to do just about anything.
Another important element of indexed universal life insurance policy is death benefits. The death benefit basically is the maximum amount of money that the insurance company will pay out once your death benefit has been depleted. As long as your account has adequate cash value, the insurance company will cover the rest of your death benefits. In the event of your death, your beneficiaries will get the full amount that you have earned, if not more.
You must be aware that the premiums for these types of policies are usually higher than traditional permanent life insurance protection. This is due to the insurance company needing to compensate for the increased risk of loss associated with investing money in a higher-risk investment portfolio. In addition to the higher premiums, however, you may also find that you are granted a greater growth benefit based on your age. This is because you are considered a greater risk than younger people.
Indexed policies are not only for people who are younger. They can also be very useful to older people who are looking to cash in on their benefits or to employers who are looking to replace existing benefits with cash value coverage. Employers typically prefer indexed policies over other options, such as cash surrender and renewable term life, because they provide employees with an opportunity to build cash value on a tax deferred terms. In addition to the premiums, employers generally pay most of the cost of these policies until the death of the covered employee.
The downside potential of indexed policies is what make them appealing to many people. If you choose the wrong option, though, you could be stuck paying large premiums for a policy that has virtually no upside potential. One of the best ways to ensure that you get the right policy is to consult with an experienced insurance professional who can help you determine which option provides you with the most benefits at the lowest cost. In general, though, it is easy to see that indexing policies offer a number of distinct advantages and few drawbacks. If you are concerned about cash value growth, consider an indexed universal life policy.