Life insurance is one of the best safety nets that you could ever buy for your family.
It’s one of the only ways that you can ensure that your loved ones have the money that they need, regardless of what happens to you. Life insurance has changed drastically since the idea was born.
There are dozens of new types and variations of plans. It’s important that you’re buying the best type of coverage to meet your needs. With this article, we are going to explore indexed universal life insurance and its relationship with mortgage protection.
New ideas surface all the time. New types of life insurance coverage are hitting the market every year.
We recently showed a couple of clients how they could use indexed universal life for mortgage protection. I try to communicate at least once a year with my clients to review their life insurance policies and make sure we address any changes that may have occurred during the previous year. Many times a phone call is enough to learn that we don’t need to spend any time on the subject. Sometimes there have been changes need to be addressed. We all experience life changes and we may not even think about what those changes mean to our life insurance plans.
I recently met with a married couple that have been clients of mine for about 15 years for an annual review of their life insurance policies (we will call them Jack and Joan). They are both in their early 40’s and in great health. After about 30 minutes into their policy review, we had discovered a gap in their coverage. The couple recently had their oldest of 3 children enter college on a full scholarship. Not only has their daughter earned a full ride to our local university, they had also done a great job saving for her college expenses. Since the daughter didn’t need any financial assistance for college, the couple decided to purchase an upscale condominium right next to campus. Since she had planned on having a couple of roommates, they decided to purchase a 3-bedroom condo as an investment. They figured that the other 2 children would eventually be able to use the condo when they started college.
Now we all know condos these days are not like the condos of 20 or 30 years ago. Granite counter tops, stainless steel appliances, flat screen TVs, swimming pools and hot tubs. You get the picture, sounds like a vacation instead of school. Well, the cost of the condo was $300,000 and they financed the purchase with their mortgage company. Since their finances were great and were able to put down $75,000 on the condo their mortgage was $250,000. Here is the gap that I had mentioned. They needed an additional $250,000 of life insurance coverage to pay off the condo in case one of them were to die prematurely before the kids got out of college.
Now we could have just done a 20-year term policy on each of the parents. During our discussion, we had determined that they were also having a tough time finding what to do with some of their additional income. CD rates are at an all-time low and they had enough of their investments in the stock market. They were both maxing out their 401k and 403b plans at work and they already have the kids college savings taken care of. Sounded like a great opportunity to talk about IUL policies.
I educated them on how they could have the additional life insurance protection that they needed to cover the condo debt and at the same time create a bucket of money that could eventually be used to help fund their retirement. So, in this case, we will use indexed universal life for mortgage protection.
We took $1000 per month and used that to buy a $250,000 indexed universal life insurance policy on each of parents. By putting $500 per month into Jack’s policy for 23 years, we were able to accumulate over $300,000 in the policy. At that point, Jack will be age 66 and we are able to take a tax-free income stream of about $30,000 per year for the rest of his life. This assumes that we only make 7% return in the policy each year. We also did the same for Joan. We put $500 per month in her $250,000 indexed universal life insurance policy. Since she is female and 1 year younger than Jack, her numbers were even better. Her policy will accumulate to over $300,000 also but the tax-free income that the policy generates for here at age 65 is about $32,000.
We just used indexed universal life for mortgage protection
Jack and Joan had never heard of indexed UL. Most people only hear about term life insurance or whole life insurance and universal life insurance. Indexed universal life insurance can be a great savings vehicle to place your extra funds each month. Indexed universal life insurance offers not only a death benefit to cover your family when they need it the most, it also offers some living benefits that you will be able to benefit from too.
We have many clients that have purchased indexed universal life insurance over the last 10 or so years. In this case with Jack and Joan, the coverage is able to provide a very nice income for the two while they were able to keep the mortgage on the condo protected at the same time. Others buy indexed universal life insurance because maybe they don’t want to pay premiums forever and the cash value buildup can pay the premiums later in life. There are many situations where indexed universal life insurance can be used.
Working With An Independent Insurance Agent For Indexed Universal Life Insurance
When you’re shopping for insurance coverage, regardless of which type of policies that you decide to buy, it can be a confusing process to find the one that works best for you. There are several different types and thousands of companies to choose from. It’s an overwhelming process, but that’s why our agents are here to help.
We are independent insurance agents, which means that we don’t work with one single company. Instead, we represent dozens of highly rated companies across the nation and we have years of experience working with all kinds of applicants and connecting them to the best plan to meet their needs.
Every insurance company is different, and all of them are going to offer you different rates based on their medical underwriting and rating system. It’s important that you get dozens of quotes before you decide which plan to buy. Instead of wasting your time calling all of those companies yourself, let one of our independent insurance agents do all of the work for you. Instead of having to answer the same questions over and over again, let us bring all of the best rates directly to you.
We know that nobody wants to think about his or her own death, but it’s important that you plan for the worst. You can’t avoid death, and not making the proper preparations will leave your family with massive debts and difficult decisions to make.
Indexed universal life insurance can be a complicated purchase because of all the different components and benefits that you’ll need to consider. If you have any questions about one of these plans, please contact one of our agents today. We can walk you through the process to give you a better idea of how these plans operate.
When you’re deciding which type of life insurance to buy, it’s important that you always account for the main purpose of any insurance plan, to protect your family if something tragic were to happen to you. Regardless of which type of plan that you choose, it’s vital that your family will have the money that they need if you were to pass away.
If something tragic were to happen to you tomorrow, your family would be responsible for hundreds of thousands of dollars of debt, which is going to make the situation a lot worse. You can’t predict the future, which means that you shouldn’t wait any longer to get the insurance coverage that your family deserves. It’s our mission to ensure that your family has the perfect insurance plan at an affordable price.
If you are curious as to what an indexed universal life insurance policy would look like for your personal situation, give us a call at 1-800-712-8519.
Frequently Asked Questions
Why choose Indexed Universal Life insurance for mortgage protection?
Indexed universal life insurance can be a great savings vehicle to place your extra funds each month. Indexed universal life insurance offers not only a death benefit to cover your family when they need it the most, it also offers some living benefits that you will be able to benefit from too.
What is a benefit of using Indexed Universal Life insurance for mortgage protection?
One scenario is that you can have the additional life insurance protection that they needed to cover the mortgage and at the same time create a bucket of money that could eventually be used to help fund your retirement.
How do I get started to purchase a Indexed Universal Life insurance policy?
Indexed universal life insurance can be a complicated purchase because of all the different components and benefits that you’ll need to consider. Contacting a knowledgeable insurance agent is an important first step!