When it comes to life insurance policies, Indexed Universal Life (IUL) insurance stands out for its unique blend of flexibility and growth potential. In essence, an IUL policy offers a death benefit along with a cash value component that can grow based on a stock market index. Here are the various options that come with an IUL policy.
Choice of Premiums
One of the significant attractions of an IUL policy is the flexibility it provides in premium payments. As a policyholder, you have the freedom to adjust your premium amounts within certain limits without changing the coverage. This flexibility can be advantageous, especially during times of financial uncertainty.
Death Benefit Options
With an IUL policy, you typically have two death benefit options. The first is a level death benefit, where the death benefit remains constant. The second is an increasing death benefit, where the death benefit equals the face amount of the policy plus the cash value.
The choice between these options depends on your personal needs and financial goals.
Indexed Interest Options
IUL policies earn interest based on a stock market index such as the S&P 500. Here, you can often choose between different indexing strategies.
For example, some policies offer a point-to-point strategy, where interest is calculated based on changes in the index from one point in time to another. Others might offer a monthly averaging strategy, where the interest is determined by the average index value over a specific period.
Participation and Cap Rates
The participation rate in an IUL policy determines how much of the increase in the index will be credited to your policy. The cap rate is the maximum rate of return that a policy can receive in a given period. These rates can significantly affect the growth of the cash value and differ from one insurance company to another.
An attractive feature of IUL policies is the ability to take loans against the cash value of your policy. This provides a source of liquidity for emergencies or opportunities. Furthermore, some IUL policies offer fixed loan interest rates, while others offer variable rates, presenting another area for consideration.
Riders are additional benefits that can be added to your IUL policy for an extra cost. Some commonly chosen riders include accelerated death benefit riders, disability income riders, and waiver of premium riders. These provide extra layers of protection tailored to your specific circumstances.
To learn more, contact an indexed universal life insurance provider in your area.