Indexed universal life insurance is a compromise between aggressive and standard whole life policies. All whole life policies have a savings component, each with different interest rates.
Whole life policies are life insurance policies that last one’s entire life, which ensure that upon the insured person’s death, a payout is distributed in accordance with the policy outline. This policy differs from a term life policy, which expires after a set period; whole life policies guarantee a payout.
Indexed policies allow one to tie the cash value behind a whole life policy to an investment index. These policies are generally more profitable than standard universal life insurance, but not as profitable (or risky) as a variable policy. An indexed policy usually has a floor that keeps your investment from returning a negative. However, these types of policies have some drawbacks.
The biggest issue most people have with an IUL is that they’re not simple to understand or manage. Unless you’re an expert, you’ll likely need professional help setting up and monitoring your indexed life policy — that’s where Matador Insurance can help. IUL policies are also subject to sudden changes, fees, and mixed returns. If not properly managed, they can result in unintended losses in a critical part of your investment portfolio.
Matador Insurance has years of experience helping people from every background to find their ideal insurance solution. If you think an indexed policy is right for you or you’re seeking some guidance, Matador is here to help.
Buying an Indexed Universal Life Insurance Policy
There are a few things to note before considering buying indexed universal life. First, these policies have a floor to prevent negative returns, but they also have a cap to limit the amount returned if it exceeds a certain threshold. This means if your index nets 20% this year, but your IUL is capped at 8%, all you’ll get is 8% returned.
With that in mind, one of the most important things to understand is how indexed universal life is sold. When you begin exploring your options with an insurance agent, they’ll show you charts with projections of the indexes that you’re considering “investing” in. But, in reality, it isn’t an investment in an index, just an association.
With a floor and ceiling to control the return, it isn’t exactly an investment in the index. When an insurance agent shows you the projections and what your policy would return, this is an estimate, not a guarantee. A more stable policy, like a standard universal life policy, could guarantee you a certain amount of money after a while, but with an IUL and VUL, there’s no guarantee. The risk of a VUL makes the ceiling and floor of the IUL an even more convincing life insurance solution.
If you’re betting on the stock market, you might be interested in an IUL policy. Variable life insurance can be a huge risk, and life insurance is one thing you don’t want to treat lightly. If you want to take advantage of the stock market growth for decades to come but don’t want to risk your life insurance for it, an indexed policy might be perfect for you.
As far as options go, it has many of the same benefits that all whole life policies have. Besides the cash component, there is a guaranteed death benefit and the flexibility to change your premiums. Most universal life insurance policies provide financial flexibility by allowing the policyholder to increase or decrease the amount they want to pay in their premium. First, however, you may have to go through a health checkup.
Another great benefit of universal policies is that you can borrow money from the internal savings component you contribute to at any time. Indexed policy loans don’t even require applications. If you have the cash value in your account, you can get a loan. Paying back this loan is simple; you can keep paying your premiums to pay it out, as well as use the returns to pay off your loan.
Matador Insurance is capable of helping you understand exactly what’s going on with your money. Life insurance has been a tool for building wealth within families for decades. Matador Insurance is here to help you understand your projected gains for your policy, whether you’ve chosen a variable policy, an indexed policy, or just a standard life insurance policy. There’s no situation Matador hasn’t seen before, so contact us today to get started.