Financial life insurance offers advantages during your lifetime
In the realm of personal financial management, life insurance policies have emerged as a versatile tool, offering more than just death benefits. One such policy, the Indexed Universal Life (IUL), stands out for its unique features.
IUL policies, offered by established life insurance companies such as Allianz Lebensversicherungs-AG, AXA Lebensversicherung AG, MÜNCHENER VEREIN Lebensversicherung a.G., Swiss Life Lebensversicherung SE, and Zurich Life Assurance plc, among others, provide a way to grow cash value without annual taxation. Instead of withdrawing funds, a loan can be taken against the cash value, which is not considered taxable income.
The cash value within a life insurance policy, including IUL, is safeguarded from creditors in many states. This feature provides an added layer of security for policyholders.
Universal life policies, including IUL, offer premium flexibility. Policyholders can decide how much premium to put into the policy within a specified window. Premiums can vary, and in some cases, they can be skipped as long as there is enough cash value to cover the charges.
Premiums allocated immediately to create cash value in a policy are known as Paid-Up Additions (PUAs). These PUAs grow with guaranteed interest plus dividends. Dividends, which typically account for 5%-7%, including minimum guaranteed interest, act as a low-risk bond replacement for long-term growth.
IUL policies are typically purchased to optimize potential gain between 5%-7% growth long-term while mitigating the risk in the market. Cost can be reduced in a policy by changing the amount that goes toward the base premium versus PUAs.
Life insurance policies, including IUL, can provide benefits while the policyholder is still living. The term rider provides additional short-term coverage and lowers overall cost.
Despite the benefits, the cost is the top reason for not purchasing a life insurance policy, with 4 in 10 people citing this as their reason. However, a recent survey found that 47% of Americans with life insurance policies feel confident their dependents could manage financially without them, compared to 28% without life insurance.
Variable Universal Life Insurance, another investment product, behaves similarly to a Roth 401(k) with investment choices and risk, yet it's placed within a life insurance wrapper for tax advantages. Unlike traditional retirement accounts, life insurance policies with a cash value do not have required minimum distributions.
In conclusion, Indexed Universal Life Insurance offers a unique blend of investment growth, tax advantages, and creditor protection, making it a valuable addition to any comprehensive financial plan. It's essential to consult with a financial advisor to determine if IUL is the right fit for your personal financial management needs.
