Indexed Universal Life Insurance: 3 Reasons Why It’s Worth It

couple happy with agent after purchasing universal life insurance

A universal life insurance policy is a unique combination of life insurance protection, policy options, and cash value-building elements. Universal life policies are very beneficial and will suit the needs of almost any walk of life. One of the many features of an indexed universal life insurance policy is that the policyholder may allocate a portion of their premium payment toward annual renewable term insurance. This additional asset provides increased protection at a fraction of its normal cost. 

Furthermore, after deducting the fees, the remainder of the premium payment is added to the policy’s cash value. This allows for greater financial stability in your policy. The cash value is also credited either monthly or annually with interest-based on increases within an equity index.

Why It’s Worth It

With an indexed universal life policy, policyholders can expect greater upside potential, flexibility, and tax-free gains with their cash value.

Increased Coverage

Not only do indexed universal life insurance policies provide permanent coverage, but they also offer annual renewable term insurance. Annual renewable term insurance gives increased coverage and added protection for your finances and your loved ones in the event of your death.

The death benefit of your universal life policy is similar to that of a standard permanent life policy. As long as the premium payments keep coming through, the beneficiary will receive the death benefit in the event of the policyholder’s death. In addition, the death benefit of the additional annual renewable term policy will also be paid out to the beneficiary during the policy term. The advantage of the additional renewable term policy to your indexed universal life policy is that the policyholder receives the benefits of a term policy at a fraction of the cost.

Not only is there an additional death benefit, but policyholders may use their annual renewable term policy to secure loans from lending services. Often, people use term policies as leverage to secure a loan. Purchasing an asset, at a fraction of its usual cost, that it will leverage is a benefit in itself when considering indexed universal life.

Increased Cash Value

Cash values of an indexed universal life insurance policy accumulate funds much faster than permanent life insurance policies. This is because part of the policyholder’s premium payment goes directly into the policy’s cash value after deductions.

Cash value is an integral part of any permanent life policy. The more funds you have available in your policy’s cash value, the more you can do with it. Policyholders can use the cash value to reduce policy premiums, increase death benefits, buy additional coverages. More importantly, policyholders can borrow them at any time.

Having a cash value component that increases throughout your lifetime tax-free is a beneficial asset to have at your disposal. With indexed universal life policies, policyholders can make the most of their premium by receiving percentages of it in return as cash value. 

Credited Interest

Policyholders can expect tax-free market gains without the risk of loss during a market downturn. The cash value component of indexed universal life policies earns interest based on a stock market index. The most commonly used index is the Standard & Poor’s 500, which tracks the growth of 500 major US companies. This index reflects both positive and negative changes in the market. As a result, most insurance companies offer a guaranteed minimum rate of return. This way, policyholders know exactly what their returns will be at a minimum either monthly or annually.

Indexed universal life insurance policies are less risky than variable universal life policies because you are not directly investing your funds into securities or mutual accounts. Begus Insurance Group agents offer expertise and specialization as it pertains to indexed universal life policies. Contact Begus Insurance Group today for your free consultation