Carey Williams

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Indexed Universal Life Insurance

Features:

  • Permanent
  • The most flexibility - the death benefit, premiums, and cash value are perpetually adjustable in the hands of the policyholder.  That makes universal life insurance a more useful investment vehicle.
  • Affordable - It is more expensive than term life insurance but less expensive than whole life insurance.
  • No set schedule of payments - there is no required premium—you pay whenever you want, however much you want.  For example, you may want to only pay premiums during your working lifetime and stop paying premiums by age 65 but continue to enjoy permanent coverage guaranteed to age 120 or so
  • The growth of cash value is not fixed.  The interest rate is subject to change, but changes are not in the hands of your insurer.  Your insurer may provide you a choice of certain market indices to which to bind your interest rate.  (You can still expect a guaranteed minimum rate of interest, however.)
  • The insurance carrier makes periodic charges against your cash value account—a charge for administration, a charge for COI, a charge for loading, etc.
  • In order to ensure that the policy remain in force, the policy holder must attend to the amount of cash value saved up and at all times maintain enough to meet the insurer's charges.
  • It's primary role is equity for your policy—at any time, the policy owner can cash in his/her policy and walk away with its cash value.



Types of Indexed Universal Life Coverage:

  • Level Death Benefit - the death benefit is equal to the face amount.
  • Increasing Death Benefit - pays a death benefit of your policy's face amount...PLUS any accumulated cash value.  The downside is that this option costs more than the Level Death Benefit option



Considerations:

  • Your FUTURE INSURABILITY.  Let's say you are healthy now but later on during your policy term a serious health condition develops that ultimately makes you a higher risk to insurance companies.  When your policy expires, you will have to face higher rates OR if your condition is very serious...the possibility that no insurance company will be willing to offer you coverage at all!  So, if this is a potential concern, then I strongly urge people to consider the longest period of coverage that they can afford OR consider other styles of life insurance that are deemed to be "permanent" life insurance (versions of whole life insurance and universal life insurance.)
  • If you already have some health issues, you may be able to get a certain level of coverage through your employer on a  "Guarantee Issue" basis at attractive rates.  However, if you leave this employer, you may not be able to take this coverage with you



Reasons to Purchase Indexed Universal Life Insurance: 

  • Cover debts / liabilities (e.g. home mortgage / funeral costs).
  • Maintain a spouse's standard of living.
  • Provide income for children until they become adults
  • Pay for daycare, schooling or college education.
  • Fund a Buy/Sell Agreement for a business so the remaining business partner(s) can continue running the business
  • Protect a business from substantial income loss in the untimely death of a key employee.
  • Protect an Estate against liquidation
  • Tax Advantaged Investment Vehicle
  • Funding a Retirement Plan





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