Features That Make Indexed Universal Life Insurance A Good Choice
Indexed universal life insurance combines investing with life insurance, and it does so in a unique way. Here are the features that make indexed universal life insurance generally a good option for life insurance.
Lasts for the Duration of Your Life
Universal life insurance is designed to provide coverage for the entire duration of your life, eventually paying death benefits whenever you pass away. Even if you pass away late in life, this type of policy can still pay benefits to your loved ones.
Universal insurance is different from term life insurance in this way. Term insurance only provides coverage for a set amount of time, such as 10, 20, or 30 years. If you live beyond the term of a term life insurance policy, the policy won't pay any benefits upon your passing.
Can Be Sold Later in Life
Since universal life insurance lasts for the duration of your life, it's effectively an asset you can use late in life as you want. Most people keep the life insurance coverage themselves, intending to pass on the death benefit proceeds to whomever their named beneficiaries are. You can sell the policy if you want to, though.
Should you choose to sell your universal life insurance policy later in life, you'll receive an upfront payment. Whoever buys the policy will become the named beneficiary, and thus collect the death benefits when you pass. They'll also take over the responsibility of making premium payments.
Even if your current intention is to leave your universal life policy's death benefits for loved ones, having the option to sell the polis is helpful. You never know what medical or assisted living costs you might have to pay during your final few years, and selling helps ensure you can afford the unexpected should you have to.
Correlates the Market's Returns
Indexed universal life insurance policies have investment components that are pegged to a specifically identified index of stocks, bonds, or other assets. The returns afforded by the insurance policy will mirror whatever the index does, going up when it increases, and going down when it decreases.
Being pegged to an index makes the investment portion of indexed universal life policies different than the investment portion of standard whole life insurance policies. Most whole life insurance policies have an investment component that doesn't follow an index but instead provides flat returns. The index peg ensures your investments earn more when markets do well.