What is an indexed life insurance policy?
The purpose of an Indexed Universal Life insurance policy is to first and foremost provide a death benefit - that should be the primary reason someone purchases a policy. But when properly funded and structured, it can also provide valuable benefits that you can use while you’re alive. With an Indexed Universal Life policy, you don’t have to die to take advantage of the policy’s benefits.
What are the benefits and tax advantages?
First, as a cash-value life insurance policy one of the biggest benefits is that the policy will provide a valuable death benefit at the time of death. The fact is, according to a 2014 LIMRA study less than half of middle market consumers ages 25 to 64 have individual life insurance coverage. Forty-four percent of those without life coverage say they need it, so there are many individuals out there who need to protect their loved ones with life insurance.
The great thing about having life insurance as a part of an overall financial plan is that if the owner dies prematurely, the death benefit can be used to help maintain the family’s lifestyle in a time of financial and personal turmoil.
What’s amazing about all cash-value life insurance products, such as Indexed Universal Life, is that the policy can be structured to provide some additional benefits that can be used during your lifetime, not just at death. For the most part, products such as Term Life insurance only provide death benefits, and there are no additional benefits beyond the death benefit.
Under section 7702 of the Internal Revenue Code, when the policy is properly structured and funded, the owner will experience tax-deferred growth of their cash-values, and tax-free distributions of income at any age. Unlike some retirement products, with an Indexed Universal Life policy you don’t have to wait until you’re 59.5 to access your money without tax penalties. Last, a really nice advantage when compared to other retirement products is there are virtually no contribution limits.
Who are the best candidates for an indexed life insurance policy?
The best candidates for an Indexed Universal Life insurance policy are those people who need some form of death benefit protection. The majority of people who traditionally buy this product are between 30 -55.
Where can people go to research options?
That’s an interesting question as it’s probably pretty difficult for a consumer on their own to “research” these policies. Each carrier and product, while similar, are vastly different and it takes a trained insurance agent to work with a client to first understand their needs and then second, recommend an appropriate product that meets their needs.