Here at Ogletree Financial, we get a lot of questions every year. Some of them are easy to answer, while others are a bit more complicated.
There are a lot of questions surrounding indexed universal life insurance plans. It’s vital that you understand the policies and all of your options to ensure that it has the protection that you need. In order to help you understand these plans, we are going to show you an example of one of our clients.
It was a couple weeks after Ron’s birthday when he watched his son pull out of the driveway and leave for college. Ron knew he had to turn his retirement savings up a notch. Ron decided to buy indexed universal life insurance at age 41.
It was the day that he had both longed for and dreaded for several years. His son’s life at home with mom and dad had come to an end.
Ron spent some time deciding what he was going to start doing with the money he had been putting away every month into his son’s college fund.
Indexed Universal Life Insurance At Age 41?
Sure he had fantasies of what he would have liked to start doing with the money, what dad doesn’t.
A small cottage in the mountains, an old Corvette, a yearly vacation, these were all thoughts that started consuming his mind as Ron would take his evening walk through the neighborhood. With retirement growing closer, he finally decided that it only made sense to use the money as an investment instead of another payment.
He called us and set an appointment to discuss the options we could make available for him. He didn’t have to listen for very long once we started discussing indexed universal life insurance policies.
These policies first became available in 1997 through Transamerica. There are over 40 life insurance companies which offer indexed universal life insurance today, with new companies being added to the list each year. These policies offer permanent protection and have the ability to earn market like returns. Regardless if your goal is to cover business or personal needs, this can be the option that makes the most sense.
Ron’s goal was simple. We designed the indexed universal life insurance policy to grow in cash value to later create a tax-free income stream.
Your premium payments are able to earn interest and increase value of the plan. The cash value may be used towards supplementing your retirement or financing anything you would normally use a bank for such as a car, boat, home improvements or just whatever.
Ron will have other assets working for him such as a 401k program or other investments. So in Ron’s case the goal of this policy is to build cash value and take an income stream. Remember this income will be tax-free.
Ron was able to buy 2 policies. He bought one on himself and also for his wife Linda. They each put $5000 a year into the policies. We designed the policies to have very little life insurance – the intent is to build cash value. The lower the amount of life insurance the less the expenses in the policy are.
With an average return of 7%, Ron would have a policy cash value of around $280,000 by the age of 65. This would create a tax-free income of around $25,000. Ron’s policy death benefit started out at $117,000 but by the time he reached age 65 the death benefit had grown to around $380,000.
Linda is also the same age as Ron. Her $5000 per year would buy a policy with about $162,000 in death benefit. When Linda is 65 years old, her cash value in the policy would be about $260,000 and the income her policy would provide would also be around $25,000 per year. The death benefit would have grown to about $420,000.
Ron made a great decision to buy IUL. The income from both policies will be around $50,000 per year plus they will provide a lump sum life insurance payment when they die.
What a great deal for Ron and Linda.
Life Insurance Alternatives
IUL is a specialized type of coverage. It’s not the best choice for everyone.
For the vast majority of applicants, term insurance is going to be the more effective route. What makes term plans a sound decision? Term gives you the most amount of life insurance for the least amount of money. Because these plans are only effective for a certain point, they are going to be the most affordable life insurance plan to meet your needs.
Another option for your life insurance coverage is to purchase a whole life insurance plan. You’ll have life insurance protection until you hti the max age limit. Just like with IUL, whole life builds cash the longer you pay the premiums.
In addition to these two kinds, there are also other plans, like no exam or guaranteed issue. Both of these will skip the medical exam part of the application. As far as coverage, you can either get a term type or a permanent form. The insurance will function the same, without the exam.
Life Insurance at 41
IUL insurance could still be a viable option, even at 41. If you’re spinning in circles trying to make this decision, stop spinning and give us a call . Why should you call us?
Because we can eliminate the confusion and deliver you with quality options. Go ahead and give us a call or head over to our contact page.
Frequently Asked Questions
Why is Indexed Universal Life insurance a good investment?
Your premium payments are able to earn interest and increase value of the plan. The cash value of the IUL policy may be used towards supplementing your retirement or financing anything you would normally use a bank for such as a car, boat, home improvements or just whatever.
Is 41 too old to buy Indexed Universal Life insurance?
IUL insurance could still be a viable option, even at 41. Contact a life insurance agent that is qualified to explain Indexed Universal Life insurance to get your questions answered.