Have you heard of an indexed universal life insurance policy, but are unsure if it is right for you? This type of life insurance policy is very different from what you may have heard about with traditional policies, as it offers options for cash growth. Here are some of the benefits that you may not be aware of that an indexed universal life insurance policy offers.
A huge advantage of having an indexed universal life insurance policy is that it has tax-free death benefits. If you were to pass away while the policy was still in effect, your beneficiaries would receive a payment that they wouldn't have to pay income taxes on. This can be helpful if you have people that rely on you for the household's primary income, and the life insurance policy will give them financial safety after you pass.
Cash Value Growth
An indexed universal life insurance policy has the potential to offer you cash value growth. This means that the value of the policy will increase over time based on the performance of the stock market. As the market does better overall, the policy's cash value will increase accordingly up to a certain percentage.
The reason that the growth is capped is that you have protection from market downturns. You are not going to lose cash value as if you invested in actual stocks. This means that you can have peace of mind that the cash value of your life insurance policy is protected, but still grows at a fast rate.
You also have control over how those premiums are invested. You can pick investments that are a higher risk for potentially faster growth if that is what you want to do. However, all investments have their own risks and rewards, so you need to pick carefully to ensure that the policy's cash value will still grow over time.
An indexed universal life insurance policy gives you some flexibility that other life insurance policies do not have. The financial needs of your family are always evolving, and you will have the ability to adjust the death benefit and premiums over time. You are not locked into the exact same policy for quite some time, and you can make the necessary changes. For example, you may want to decrease your premium payments in exchange for lower death benefits, which could be due to having other investments performing quite well.