In order to qualify for the best rate, it may be beneficial to compare IUL on an individual basis. One important point to consider when comparing ULIPs is the cost factor involved in buying a policy. This cost will vary from one insurer to another, so it is important to compare a wide variety of insurers who all offer different premium rates. Comparison shopping helps to ensure you get the lowest suitable rate for your circumstances.
Individual Unlisted Life is an unlisted insurance product available to consumers. It provides a guaranteed death benefit along with a fixed cash account which is used to cover policy expenses or take out loans and withdrawals. The cash value accumulation feature permits the policyholder to choose a high interest savings account and invest the money over time. Withdrawals are made from the account when policy holders pass away, and investments in other funds may also be made, up to a specified level. Policyholders must maintain these accounts with the insurance company. Policyholders do not need to disclose their deaths while under this insurance plan, as they do not receive any benefits during their lifetime.
Indexed Universal Life (IUL) is similar to traditional Permanent Life policies. If one is nearing retirement age, then it makes sense to convert one’s life insurance into a ULIP, as long as it does not negatively impact one’s financial plans. A basic IUL has a defined cash value and a fixed index in which to accumulate credits. The benefit and cost components of a typical ULIP are very similar to those of a conventional permanent life policy.
A basic difference between a whole life insurance policy and a universal life insurance policy is that the former features a fixed benefit which increases over time, while the latter feature growth opportunities. A good example of the flexibility inherent in whole life insurance policies is the ability to borrow against the accumulated cash value of the plan. In addition, both permanent and term life policies provide policyholders with tax advantages. Lastly, universal life policies are not tied to particular stock market indices. However, they are susceptible to drastic changes in stock prices.
All iuls policies include the ability for the policyholder to borrow against the value of the plan, up to a certain level. Borrowing against the accumulated cash value is referred to as premium growth. The most important advantage of iul policies is the very low premiums, which allow the policyholder to choose between high performance and low performance investments.
As compared to whole and term life insurance, iul policies have very low costs per annum. This means that the overall cost of an iula policy is lower than most other forms of insurance. The main reason behind the relatively low premiums is that the policyholder is able to borrow funds against the accumulated cash value of the plan, up to a pre-determined level. Also, the premiums are based only upon the age at which the policyholder has purchased it, and not on gender, occupation or any other criteria. Lastly, iul policies have no minimum coverage requirements, so the younger you are when you take out the policy, the lower your premiums will be.
As with all insurance, iula plans include two main components – an “inflation protection” component, which aims to provide policyholders with both protection against increases in key economic indices, as well as an “affordable cover”, which covers the cost of basic costs incurred due to illnesses or accidental death. The inflation protection feature of iula policies is called Indexed Universal Life (also known as IVL). The inclusion of an index of fixed interest rates makes it easy to determine the amount of premium that you need to pay every month. The affordable cover component of the iula policy is achieved through variable CVs, which allow the policyholders to borrow against their accumulated cash values. Once the monthly premiums are paid, the remaining cash remains in a separate account, called a Cover Amount.
Unlike most other types of insurance, the surrender charge on iula policies is levied on the first day of the policy’s validity. As such, if you are concerned about this aspect, you should take note that “plan” often means a short period of time, ranging from one month to three years. The reason for the high surrender charge is that, unlike most forms of insurance, there are several circumstances during which a policyholder may end up outside the protection of the policy. For example, during emergency situations where medical treatment is urgently needed, or during periods when a person may become unemployed due to a drastic change in circumstances (such as losing his job due to lay-off), or if the policyholder gets married, the policyholder will be required to surrender his benefits before they expire. This means that they will have to forfeit the surrender charge during the initial period.