When you’re shopping for life insurance coverage, there are dozens of different factors that you’ll need to consider to ensure that you’re getting the best plan available. It can be a difficult process trying to decide which plan is going to work best for you, but it’s important that you find the best coverage.
There are several different plans that you can choice from, each of them has different advantages and disadvantages that you’ll need to consider to ensure that you’re getting the best protection for your loved ones. One option is to buy an indexed universal life insurance plan. These policies have several unique benefits that are not offered by another type of life insurance plan.
One question I get a lot is how can Indexed universal life insurance be a better retirement savings vehicle than my 401k through work. I think you must understand how an indexed ul policy works before you can answer that question. Another question I get is, Should I buy indexed universal life to help with retirement? You have to know how your money grows and how you can access your cash when you want to retire. There are several things to consider before answering this question.
This article is going to look at the different advantages of an IUL life and will help you decide if one of these plans would work well for you.
Should I buy indexed Universal Life?
Do you need Life Insurance? Keep in mind that this is life insurance. Are there people that depend on you financially that would suffer if you were to die today? Indexed UL can be a great way to protect your family and at the same time help build a secure retirement.
Do you get a match from your employer? If your employer is helping you fund your 401k through a matching contribution, chances are you need to be taking advantage of that. I would say that free money is the best kind of money. At least, contribute to your 401k up to the amount that your employer is matching.
What is your tax bracket? Your tax bracket can play a big part in whether or not to purchase an IUL. When 401ks were first established in 1978 federal income tax rates were as high as 70%. Today we are fortunate not to have 70% income tax rates but many still are taxed at the top rate of 39.6% and that is just the federal income tax. Every dollar that you take out of your 401k or other qualified retirement plan will be taxable at the current tax rate. It makes perfect sense to defer income if you are in a high tax bracket today assuming that your income tax rate will be lower during your retirement years. You are limited to the amount that you can defer so by establishing an IUL can help you avoid increased taxes during retirement.
What is your age? When is the best time to plant a tree? 20 years ago. Your age can play a large part in the decision. The younger you are when you start an IUL the better it will work for you. Although 20 – 60 is really the sweet spot, we also see clients purchase IUL in their 70s. When using the IUL for retirement income, 10 years of contributions and growth is ideal.
How is your health? Your health will also play a role in whether to purchase an IUL. If you have health issues such as someone needing life insurance with heart issues that would cause you to have to pay a higher premium, this may not work for you. We do have some companies that have table shave programs that would allow you to get a standard offer in the event you were rated 3 to 4 tables.
How much can you save? A popular school of thought in the financial advisor community is to save at least 20% of your take home pay in long-term savings. So if you are putting 5% – 10% into your qualified plan consider putting the rest in the Indexed UL. If you can save more than 20%, good for you. A couple of things to know about an IUL is that there is no limit on how much you can put in and premium payments are flexible. If you need to take some time off your policy can continue to grow.
How long until you retire? Like I mentioned above, 10 years is really a minimum you would want to contribute to an IUL. So if you are 5 years away, you will need to fund the IUL heavily for at least 5 years and maybe put off receiving income for 5 more.
What is your risk tolerance? 401ks and employer-sponsored plans are typically invested in stocks and mutual funds that are subject to loss. If you have a problem with losing your money from stock fluctuations, then you may want to consider establishing an IUL due to the fact that your money is safe from losses.
Getting Affordable Life Insurance
Regardless of which type of life insurance policy that you buy, or your purposes for buying it, it’s vital that you’re getting the most affordable plan available. One of the most common reasons that people don’t buy life insurance is because they assume that it’s going to be too expensive to fit in their budget, but in most cases, that couldn’t be further from the truth. There are several ways that you can ensure that you’re getting the lowest premiums available.
The first thing that you should do is eliminate any tobacco that you currently use. Smokers and tobacco users are at a much higher risk for being diagnosed with severe health complications, which means that they are going to be a much great risk to the insurance company. That great risk is going to translate into higher premiums. In fact, smokers are going to pay twice as much for life insurance versus what a non-smoker is going to pay for the same sized plan. If you want to save money on your life insurance protection, it’s time to cut the bad habit once and for all.
The next thing that you should do is improve your overall health. Before the insurance company approves your application, they are going to require that you take a medical exam. The results of the medical exam are going to play a huge role in how much you pay for your insurance coverage. If you want to save money, you’ll need to get better results. There are dozens of different ways that you can do that, but the two best ways are to start hitting the gym and sticking to a healthy diet.
The best way to ensure that you’re getting the lowest premiums is to work with an independent insurance agent. Unlike a traditional insurance broker, independent agents work with dozens of highly rated companies. Every insurance company is different, which means that you could get drastically different rates depending on which company that you get a quote from. If you want to secure the lowest premiums, it’s important that you get dozens of companies before you decide which company is going to work best for you. Instead of wasting your time calling all of those companies yourself, let one of our independent agents do all of the hard work for you.
Term Life Insurance
Now, if you’re looking for cheaper insurance coverage, you’ll need to purchase a term insurance policy instead. Term life insurance policy is the most traditional option for insurance protection. Term insurance doesn’t offer any of the additional benefits like IUL insurance does. It’s basic coverage which is only effective for the length of term you purchase.
Because term life insurance is basic and doesn’t offer the investment component and they are only temporary, they are drastically cheaper than other forms of life insurance. If you want to save money on your insurance protection, you need to decide which kind of plan you want to buy. Going with a term insurance plan instead will save you thousands of dollars every year. Because term life insurance hasn’t having the saving and investing portion of the plan, you should use the money you save to invest.
How should you decide which type of plan is best for you? It can be a confusing decision, but there are a few things you should know when making that choice. First of all, I am not suggesting that you depend solely on indexed universal life insurance for retirement. There are many great places to save your money for later use during retirement, indexed universal life insurance is just one of them. Everybody’s situation is different so it is up to you to decide whether IUL is right for you. We have many educational tools that can help you learn more about indexed universal life. We can also put together a personalized proposal for you so you can see what an IUL would look like in your portfolio. You can give us a call at 1-800-712-8519 or use the contact us form to get your proposal.
You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the insurance protection that your family will need. Regardless of which time that you choose, IUL or a traditional term plan, it’s vital that you have life insurance in place. If something were to happen to you, and you didn’t have insurance coverage, your family would be responsible for a mountain of debt, which is going to make the whole situation a thousand times worse.
If you have any questions about indexed universal life insurance or about the other life insurance options available to you, please contact one of our agents today. We have years of experience working with all types of clients across the nation, and we can help you decide which plan will meet your needs. Not only that, but we can bring all of the best rates directly to you. Don’t wait any longer to get the insurance coverage that your family deserves.