Getting life insurance can be a great way to financially protect loved ones and build wealth. But choosing a policy may seem daunting since there are so many types to choose from. If you have more complex financial plans and need lifelong coverage, then an indexed universal life insurance policy might be the right option for your needs. This article will dive into four reasons prospective policyholders should consider getting indexed universal life insurance quotes.
1. Higher return potential
Indexed universal life insurance has a cash value component that is invested into a fund tracking a market index of your choice, such as the S&P 500. This creates the potential for higher returns than a whole or universal life insurance policy. Markets can decline, but indexed universal life insurance also comes with a floor rate that guarantees a minimum earnings rate regardless of the market. As a result, you can potentially earn higher returns while guarding against losses.
2. Allows for flexibility
Indexed universal life insurance has adjustable premiums and death benefits. This allows for more flexibility because you can reduce your premiums if you need to save money or increase your death benefit if you need to increase your coverage.
Lowering your premiums will reduce your death benefit. On the other hand, increasing your death benefit will cause the insurer to raise your premiums, and they may also require you to take another medical exam in some cases.
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3. Tax benefits
Indexed universal life insurance death benefits are tax-free. This means your loved ones can receive more of the funds they need if you pass away by saving on taxes. Furthermore, your cash value grows tax-deferred, so any gains you earn in the market are not taxed while they remain in the cash value. This allows you to maximize the effect of compound interest and potentially grow your cash value faster.
Typically, permanent life insurance cash value lets you withdraw from it or borrow against it at favorable rates and terms when the cash value is large enough. The insurer pays out your cash value minus surrender charges if you surrender the policy, too.
Indexed universal life insurance adds the ability to pay premiums with your cash value once it’s large enough. This can help you maintain coverage and reduce the impact of premiums on your budget.
Keep in mind that if the cash value gets too small, your policy can lapse and cause you to lose coverage. Picking the right index investment in your cash value could potentially help your balance grow fast enough to reduce the chances of this happening.
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The bottom line
Indexed universal life insurance policies come with several beneficial features that could meet a variety of policyholders’ needs. These policies offer higher potential returns than whole and universal life insurance while also guaranteeing a minimum rate to help guard against losses.
The cash value growth is tax-deferred, while the death benefit is tax-free. You can even pay premiums with your cash value when you’ve accumulated enough, making it easier to afford your coverage. So, if you have complex financial needs and want more flexibility out of your life insurance, consider an indexed universal life insurance policy and talk to a qualified financial advisor.