Index Universal Life Insurance (IUL), commonly called Index Life Insurance, is gaining popularity among first-time life insurance policyholders. But what is an IUL, and why are so many people choosing it as their preferred permanent life insurance plan?
Index Life Insurance is an investment-driven product that can help you save for your family’s future and earn cash simultaneously. There’s more to an IUL Insurance plan than just the death benefits.
Here are five main reasons why Index Insurance is becoming everyone’s favorite and why it might be the best policy for you!
You Can Customize Your Index Life Insurance Premiums
Index Life Insurance policies are convenient because they help insurance providers work with your financial capabilities. The premiums at the beginning of your plan may not necessarily remain constant throughout your policy’s duration.
For example, if you lose your job or your income changes, you may not be able to afford a high premium anymore. Your family could grow, and raising another child places more financial responsibility on the household. Or maybe you’ve had an unanticipated long-term expense, like an emergency loan, so you need more cash to sustain your family’s needs.
Life happens. Regardless of the cause, you may want to lower your premiums (and your death benefit by default) to divert more funds to your personal account.
Index Universal Life Insurance has flexible premium options to accommodate your budget in tough times like these. There’s no need to stress about how you’ll maintain your life insurance plan. Your policy will remain active as long as you can maintain your newly agreed-upon premiums.
You Can Earn More Money With an Index Life Insurance Cash Value Account
Index Universal Life Insurance policies contribute the unexpensed part of your premiums to an investment index. When the stock market rises, you’ll receive interest in your policy’s designated cash value account.
You might be wondering what happens if the stock market crashes. What’s great about Index Life Insurance is that it protects you from investment losses through a 0% floor on your interest rate. Therefore, while persons who invest directly in the stock market might lose a large sum of their money, your cash value account won’t be affected.
You either earn more money or maintain your balance!
Generally, Index Life Insurance offers the potential for greater cash earnings than other permanent life insurance policies. For example, Whole Life Insurance provides a cash savings account that increases by a fixed compound interest rate, and fixed rates take much longer to accumulate cash than stock market investments.
Moreover, your profits from the index change based on the market’s performance. You could earn 10% interest this year and 12% in the next. With Index Life Insurance, there’s always room for growth.
Your Family Receives Tax-Free Death Benefits From Your Index Life Insurance Policy
We consider the death benefit the most important aspect of any permanent life insurance policy.
Many policyholders sign up for Index Universal Life Insurance because of its guaranteed tax-free death benefit. IRS fees may deduct a substantial amount from your savings, particularly if you have a retirement account like a Roth IRA or 401(k). It’s a relief knowing that your beneficiaries will receive the sum of your death benefits untaxed.
However, it’s important to note that your policy’s total death benefit decreases with every dollar you spend from the cash value account.
You Can Enjoy Living Benefits With Index Life Insurance
Some Index Universal Life Insurance policies include living benefits, which allow you to use a portion of the death benefits to cover medical expenses if you become ill. You may be able to add this option as a policy rider for a slightly higher premium. Your insurance provider may refer to this type of rider as an accelerated death benefit—this is what you should ask for.
Why is this living benefit so important?
On average, in-patients pay $30,000 for a 3-day hospital stay. We haven’t even considered the cost of prescription medication or rehabilitation sessions yet. Living benefits could become an invaluable IUL policy feature for you and your family, especially if your diagnosis requires extensive treatment.
Additionally, you can withdraw money from your cash value account during a financial emergency. This might be beneficial if you need to finalize;
- Last-minute house repairs;
- Travel costs;
- Tuition fees; or
- Business-related expenses.
You could also use it to pay off debt that your regular medical or property insurance doesn’t cover.
You Can Access Tax-Free Cash From The Index Life Insurance Policy Too!
Let’s face it! You can’t always depend on pension and social security benefits to make ends meet. Life is unpredictable; sometimes, you’ll need extra cash to cover your monthly expenses. As a result, you may choose to use your cash value account to supplement your retirement savings.
You should be happy to know that with Index Life Insurance, the portion of your premiums that contributes toward your cash value account is tax-deferred.
What does this mean?
It means that while the IRS takes a percentage of your social security and pension contributions, you won’t pay a dime from your Index Life Insurance payments. On top of that, any profit you receive from your investment is tax-free. Plus, when you’re ready to use the money from your cash value account, you won’t have to worry about paying IRS fees from your withdrawal.
Is Index Universal Life Insurance The Right Policy For Me?
There’s no doubt that Index Universal Life Insurance has attractive advantages, but whether you qualify for this policy depends on your current financial situation. The best way to determine your eligibility is to consult with a certified financial professional who has experience with cases like yours.
At The Purpose of Money, we help families every day to achieve their financial goals and secure long-term income security. Sign up for a free consultation today to learn your options and find the best life insurance policy for you!