Indexed universal life insurance
The term indexed universal life insurance refers to a form of permanent life insurance. Indexed Universal life insurance remains effective throughout your lifetime, and it is quite different from term life insurance that will no longer be effective at a certain time.
The interesting thing about universal policies is that policyholders can alter the benefits payable if you die to some limit, and premiums can be paid from the gains of the cash value portion.
The index part is what actually makes universal life insurance exceptional. You are guaranteed not to lose your money because the policies come with the lowest assured interest rate, though the interest rate are not permanent, but the insurer can chose an index.
A collection of investments such as bonds or stock is what is called an index.
Some well known examples of index are
Having a permanent life insurance policy is like having an investment instead of having an insurance policy because premiums can accumulate, and the extra money that accumulates can be invested by your insurance company.
The money that is invested and the earning accrued is the Cash value part of the policy you took, and your account will keep on increasing and earning cash until you redeem the policy.
You can surrender the cash value to your insurance company, or it can be added in your death benefits, though it all depends on the policy that you have.
Another interesting part of the cash value portion in a permanent life insurance policy is that you can not only use it to grow the death benefits till when you die, but you are also eligible to access the money whenever you need it, so if you need cash to cover the expenses of something so passionate to you, but you can’t afford it, you can access money from there.
Ways to make effective use of the cash value portion of your insurance policy
But if your aim is to surrender your policy partially, then you will be paid just some portion of the cash value and death benefits. In this case, adjustment will be made to some parts of the policy.
It is advisable to study any insurance policy document that you intend to sign, or use the service of an accountant that is vast in insurance issues in order to avoid any problems with your insurance company, because some insurance companies will not allow your policy to be surrendered partially, even the ones that allows you will make you go through a very rigorous process.
A lot of people that took life insurance policy don’t always need the policy to e effective for life. By the time they are able to offset their debts, have few people that depend on them, and are self-insured, then they feel the policy is not worth paying for.
But the cash value part of a universal life insurance is very important in paying off huge debts or the cost of a real estate that you can’t normally afford, and when the index is set at a very good rate a policyholder will see good increase in their income.
The disadvantages of indexed universal life insurance
Though indexed universal life insurance have some very good benefits, it still has some little disadvantages to it, and one of the downside is that they are quite expensive and they are added complexities to it as compared to term life insurance policy.
In terms life insurance policy, everything is easy and straightforward, because the premiums are paid by the policyholder, and when they die, the death benefit is paid.
