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There are many life insurance options available. One of them is indexed universal life insurance. These plans offer permanent life insurance policies that have a built-in savings component that earns interest based on market performance. They are called universal because they are meant to serve any person with any need.
To learn more about the pros and cons of indexed universal life insurance, read on.
What Is Indexed Universal Life Insurance?
Universal life insurance is a type of permanent life insurance, which covers the insured person until they die. When the insured person does die, a death benefit payment will be disbursed to their beneficiaries. How much money is granted depends on the terms stated in the insurance contract.
All universal life insurance policies have two main parts. The first part is the insurance, which pays out the death benefit when you die. The second part is a cash-value account, which grows as you make premium payments to the insurance company. A portion of the premium goes to the insurance and administrative fees, while the rest enters into your cash-value account.
Indexed universal life insurance is a type of universal life plan. The main difference between indexed and traditional universal life plans is that the cash value of indexed plans grows based on the performance of stock indexes, like the Nasdaq Composite.
Pros Of Indexed Universal Life Insurance
Universal life insurance policies often have flexible premiums that allow you to change the size and frequency of your payments. This can be helpful during times when you may be having financial issues. Though, you should keep in mind that underpaying can result in a decrease in coverage.
Another often-stated benefit of indexed universal life plans is that they have flexible death benefits. You have the option to increase the earth benefit when you need to, although this may require an additional life insurance medical exam to qualify. You can also decrease your death benefit after the policy has been active for several years.
One of the main benefits of indexed universal life insurance is the ability to grow the cash value of your account. Because these plans earn interest based on a market rate, your money can grow substantially if the market performs well. This is unlike whole life insurance policies, which only offer a guaranteed rate.
Cons Of Indexed Universal Life Insurance
One of the main drawbacks of indexed universal life is that, if you don’t pay attention to the value of your account, it can eventually become underfunded. This can leave you with many large payments that you have to make to maintain your coverage.
Another issue with these plans is the increased level of risk compared to other life insurance plans. The fact that indexed universal life plans are attached to the market adds in volatility. When interest rates are rising, everything seems great. But if the market has a downturn, it may leave you wondering why you chose an indexed universal plan. For this reason, indexed universal life plans are best for people who are willing to take on some level of risk in growing their cash value account.
Compare Life Insurance Plans
Indexed universal life insurance isn’t the only life insurance option on the table. You can also choose whole life, traditional universal life, or term life insurance. To compare these options with a professional, get in touch with Insured For Life. We’ll help you decide on a plan that fits your specific lifestyle and budget. To contact us, give us a call at 888-989-0079.
