Carey Williams

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Variable 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 "variable" meaning that the investment of the policy's cash value is left to the policyholder's discretion.  A policy's cash value accrues interest from the policyholder's decisions on where to invest it.  The policy owner is free throughout the life of the policy to relocate his cash value and to divide it up among his investment options as he will.  Insurers employ asset managers to oversee the cash value of variable insurance policies and carry out the changes instructed by policy owners.  Therefore, owners of variable policies can expect to pay an extra fee to cover the expense of these money managers.  The fee is calculated as a very small percentage of the total cash value being managed.
  • 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.
  • Investment options and limitations — each variable life insurance product stipulates where its cash value may be invested.  It cannot be placed just anywhere.  Why?  In order to legally sell a variable life insurance product, the life insurance company must file its product with the state insurance commissioner, FINRA (Financial Industry Regulatory Authority) and the SEC (Securities Exchange Commission) and specify where its policyholders may invest its cash value.  Thereafter, use of the product is not permitted to deviate from the specification.



Types of Variable 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.  Get approved now while you are healthy and future potential health problems that may arise will not jeopardize your ability to obtain future life insurance coverage.  In contrast for example IF you had a TERM POLICY...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.  If you were covered by a TERM POLICY that expires at some point, 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 new coverage at all!  So, if this is a potential concern, then I strongly urge people to consider a permanent style of life insurance such as Whole Life to protect your future insurability  
  • 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
  • Higher fees can reduce investment returns
  • A downside to Variable UL Life Insurance is that there is a possibility of a negative return on investment - losing cash value!







Reasons to Purchase Variable 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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