Indexed universal life insurance is a permanent insurance policy that combines features of other policies. It offers lifelong coverage, flexible death benefits and premiums, and more potential cash value growth.
However, these added features can make researching these policies slightly more confusing. It’s important to know how every aspect of indexed universal life insurance works to determine if it’s the right policy for you. With that in mind, this article will dive into five things to know before you get indexed universal life insurance quotes.
Things to Know Before You Buy An Indexed Universal Life Insurance Policy:
1. The cash value can grow based on a stock index
The 2022 LIMRA Life Insurance Barometer found that 68% of life insurance owners felt financially secure. Only 47% of non-owners felt financially secure. Part of this is the death benefit coverage, but cash value can also play a significant role by helping you build wealth.
Indexed universal life insurance has the potential to strengthen financial security even more because the cash value is invested in a fund that tracks a stock index, such as the S&P 500. This allows for more potential growth than whole life insurance policy cash value while offering instant diversification. However, returns are capped at a certain ceiling rate. Also, keep in mind that you can experience slower growth if the market has a downturn.
2. Floor rates guarantee some returns
Indexed universal life insurance cash value offers a floor rate in case the economy or markets experience a downturn. This guarantees that your cash value grows at a minimum guaranteed rate or remains at the same rate. As a result, it prevents or minimizes losses.
3. You can use your cash value to make premium payments
Just like other types of permanent life insurance, indexed universal life policies come with a cash value component that lets you withdraw from or borrow against it when it grows large enough. The cash value can also pay out minus surrender charges if you surrender the policy.
However, indexed universal life insurance also lets you pay some or all of your premiums when your cash value grows enough. This can make premiums more affordable later on. That said, keep in mind that the policy can lapse if your cash value shrinks too much.
4. Coverage lasts for a lifetime
A big reason to buy life insurance policy is to make sure loved ones are protected for their entire life. This ensures that coverage doesn’t expire when you need it most. As a permanent life insurance policy, indexed universal life insurance lasts for a lifetime. As long as you keep up on premiums and maintain sufficient cash value, your coverage will be there.
5. Premiums and death benefits are adjustable
Some people who buy life insurance want more flexibility. They may run into tough economic times and want to lower their premiums, or they may need to increase coverage without getting a new policy.
Indexed universal life insurance lets you lower your premiums by lowering your death benefit and increase your death benefit by paying more in premiums. This offers the flexibility many policyholders seek.
Indexed universal life insurance policy offers many unique features, so knowing how they work is critical to deciding if this type of policy is right for you. The policy’s cash value is invested in a stock market index, allowing for more potential growth. At the same time, the floor rate helps minimize or even mitigate cash value losses. Plus, as your cash value grows, you can use it to pay premiums.
On the coverage side, an indexed universal life insurance policy lasts for a lifetime and offers flexible premiums and death benefits. This makes permanent coverage easier to budget for. If these features sound like they fit your life insurance needs, shop around for multiple quotes. This helps you compare policies and find rates that work for your budget.
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