There are several different options available for people to choose from when purchasing a life insurance policy. One of these options is to purchase an indexed universal life insurance policy. Taking the time to review the frequently asked questions below can help to provide you with the answers to questions you may have regarding this type of life insurance and ultimately allow you to decide if an indexed universal policy may be right for you.
What Is An Indexed Universal Life Insurance Policy?
An indexed universal life insurance policy falls into the category of permanent insurance. These policies are very similar to traditional whole life insurance policies in the fact that they guarantee a death benefit as long as your premiums are up to date.
How Do Indexed Policies Differ From Traditional Whole Life Policies?
The primary difference between an indexed and a traditional whole life policy is the way in which these policies earn interest. With a traditional whole life policy, you will earn a fixed rate of interest for the life of the policy. This means that whether interest rates go up or down, you will continue to earn the same fixed rate of interest. Indexed universal policies on the other hand earn a fluctuating rate of interest that is based on the performance of a chosen stock index. While these policies do offer an opportunity to earn higher interest rates when the market is performing well, you could also experience periods of lower interest rates if the stock market is in a decline. To help minimize the risk of stock market investments these policies will typically offer an interest rate guarantee that will prevent your rate from dropping below the guaranteed level.
What Benefits Do Indexed Universal Life Policies Offer?
In addition to the death benefit that is the primary reason for purchasing life insurance, indexed universal life policies also offer the benefit of building cash value. This cash value can be used to help offset the cost of your monthly premiums. If you find yourself facing financial hardship, you will also be able to borrow against the cash value of your policy. However, if you do choose to borrow against this cash value you should be aware that there may be interest charges associated with this loan and a failure to pay the funds back could result in a reduction of your available death benefit.
The fact that these life insurance policies are a type of permanent insurance also means that you will never need to worry about your rates going up or an inability to qualify for coverage as a result of age or a medical condition. For more information on an indexed universal life insurance policy, contact your insurance provider today.