Indexed Universal Life Insurance

Indexed universal life insurance is a type of life insurance that became available about 10 years ago and is generally considered a good investment for retirement. The invested cash value of indexed universal life insurance is tied to financial indexes like the Standard & Poors and Nasdaq, also known as equities or stocks. Most of the investments are in bonds and indexed universal policies offer a minimum guaranteed rate of return on the cash value, but can produce higher returns if the markets perform well. Consumers should research indexed universal life insurance before investing since there are pros and cons to universal life policies.

Permanent Life Insurance

Many equity indexed universal life insurance policies are types of guaranteed life insurance, which never lapses. Universal life insurance rates are more affordable than whole life insurance rates for the same coverage. Some indexed universal life insurance offers a minimum guaranteed return on investment, but it is usually lower than the rates guaranteed on the cash value of whole life insurance.

Equity indexed universal life insurance bond investments usually have more stable returns over time than other universal policies which invest in stocks; however, universal life policies also offer the potential for higher returns over a longer term investment horizon, building a nest egg for retirement.

Variable Life Insurance Rates

One of the disadvantages of indexed universal life insurance is the rates charged for the insurance portion of the policy increase over time. This means that more of the premiums are used to pay for the life insurance and less are put into the investment account. The minimum and maximum premium payments remain the same, but less money is invested in building the cash value. Long term projections on the investment value of these policies may not take into account increases in insurance rates over the life of the policy, slowing the growth of your investment and money.

A life insurance quote comparison can help potential applicants find affordable rates by comparing online quotes from multiple life insurance companies. With free, instant life insurance quotes, consumers can compare policies, rates, coverage, and life insurance companies to find the best, cheap universal life policy available in the U.S.

Tax Advantages

Income tax must usually be paid on investment returns as they are earned. The profits on life insurance cash value are tax deferred until they are withdrawn from the policy. Retirees often take out loans against the cash value of indexed universal life insurance policies so they do not have to pay income taxes. If the amount of the loans equals the amount of the cash value, the policy is canceled and taxes become due at that time. The single, lump sum tax payment can be substantial if this occurs.

A Long Term Commitment

As an investment, indexed universal life insurance policies are a long term commitment. In order to realize a profit on your investment, policyholders must be prepared to remain in the investment and not change their strategy in the short term. In addition to increases in the amount of premiums devoted to the insurance portion of the policy, there may be fees associated with the investment account.

Those planning to use indexed universal life insurance as a retirement investment should research policies and insurance companies carefully to find carriers that offer solid, long term returns while controlling risk. Universal life insurance as an investment can be a smart choice, but only if you decide it is the right policy for you and your family’s financial needs.

Life Insurance Quotes

Financial experts differ over the value of indexed universal life insurance as an investment. Many life insurance agents point out that term life insurance is cheaper and individuals can invest the money saved on life insurance. Since term life insurance rates increase with the age of the insured, term life rates actually average out to about the same amount as indexed universal life insurance over time. Term life insurance does not offer the investment opportunities of equity indexed policies do and retirees can also benefit from the tax advantages provided by these types of life insurance policies.

Naturally, consumers must review indexed universal life insurance pros and cons before making a decision on whether to consider purchasing a life policy. Part of making that decision includes getting life insurance quotes to find the best low cost life insurance, determining whether life insurance premiums can fit into your budget and be affordable. Enter your zip code to begin a life insurance quote now and compare life insurance rates and companies to find the best universal life insurance for your specific needs.