When you’re looking to buy life insurance, it can be a confusing and frustrating process. There are several different types of plans that you’ll need to choose from.
At Ogletree Financial, we want to provide you with all of the info you need to make wise insurance decisions.
When purchasing indexed ul for supplemental retirement income, the earlier you start the policy the better the results. Should I buy indexed universal life at age 42?
It appears that a lot of others think so. LIMRA, The Life Insurance Marketing and Research Association recently reported Indexed universal life insurance has been on a popularity surge for several years now. In 2014, indexed universal life grew faster than any other product on the individual life insurance market. 52% of universal life premiums and 20% of all individual life insurance premiums were a result of indexed universal life insurance policies.
Similar to other forms of permanent insurance, indexed universal life insurance policies have many common uses. When structured properly, indexed
ul can build a considerable amount of cash value. Some of the uses for this are:
- College planning for the kids
- Supplemental tax-free retirement income
- Build a legacy for family
- Mortgage protection
- Estate planning
- Business planning
As you can see in the above applications, these policies are not only used as a death benefit. The policies are also used to grow the policy holder’s investment portfolio. Because these policies have an annual reset design, the interest credits from each year are set on the Index Crediting date.
None of the interest credits that have been earned can be taken away and they will continue to participate in any future growth. This will give an indexed universal life policy the advantage of compounding interest in the years to come.
Disadvantages of IUL Insurance
As you can see, there are plenty of benefits to investing in an IUL plan. They can give you advantages which aren’t available with your normal term insurance policy.
Every plan has downsides though, and IUL is no exception. Just like with any other investment, there is always a chance it won’t perform well. With IUL, the returns are based on how well the index does. If the index doesn’t do well, then you aren’t going to get good returns with your policy.
Another disadvantage to look out for is caps on returns. Just about every carrier is going to set a limit on how much you can make on returns. Each carrier has their own limits, but most of then cap the return rates at around 100%. This means there is only so much you can earn from your IUL policy.
So here is a breakdown of what indexed universal life at age 42 looks like.
Male age 42
- Premium of $5,000 per year
- Beginning death benefit $113,450
- Cash value at age 65 is $260,600
- Tax-free income at age 66 is $24,916
Female age 42
- Premium of $5,000 per year
- Beginning death benefit is $155,740
- Cash Value at age 65 is $256,954
- Tax-free income at age 66 is $24,964
When you see the amount of tax-free income that is available at retirement, this policy begins to make a lot of sense.
So just a few things about the policy. Anytime a withdrawal is made from the policy, the payout from the plan is going to be decreased by that amount. Also, a withdrawal should be income-tax free.
Most insureds choose to take a tax-free loan from the policy instead of the withdrawal. This leaves the cash value inside the policy and allows for future growth. These loans do not need to be repaid because they will eventually be subtracted from the death benefit. Similar to taking a loan against the equity in your home, these loans are not taxable.
How Much Will You Spend on Life Insurance?
If you’ve ever been told IUL insurance is very expensive, which isn’t always true. Yes, IUL is going to be more expensive than a term plan, but they are probably cheaper than you think.
Without knowing your situation (i.e. your health, tobacco habits, etc.), we can’t give you an estimate on how much you’re going to spend. There are dozens of variables the carrier is going to review.
For example, two people who are both 42-years-old, could pay drastically different premiums for the same amount of coverage. Why?
Your job can impact your rates, your medical records, your DMV records, and much more. Not only will all of those factors change how much you pay, but the carrier you get the quote from will also change the premiums.
With an major long-term investment, you NEED to shop around. If you buy the first plan you find, you’re going to pay too much. What are the chances you find the perfect policy on the first go-around?
Wouldn’t you like to see an illustration for yourself? We can design a policy for you to take a look at before you make any decisions.
You can call us at 1-800-712-8519 to discuss the benefits these policies can provide for your financial future or just use the quote button.
Frequently Asked Questions
What are the advantages of Indexed Universal Life insurance?
In addition to providing a death benefit, indexed universal life can help supplement your retirement income, pay medical bills during an illness, pay off debts like credit cards, a mortgage, or help with college tuition. Contact a knowledgeable insurance agent to find out if IUL would be beneficial for you.
Are there any disadvantages to Indexed Universal Life insurance?
Every plan has downsides though, and Indexed Universal Life insurance is no exception. Just like with any other investment, there is always a chance it won’t perform well. With IUL, the returns are based on how well the index does. If the index doesn’t do well, then you aren’t going to get good returns with your policy.
Why should I buy Indexed Universal Life insurance?
Some of its uses are: College planning for the kids, supplemental tax-free retirement income, build a legacy for family, mortgage protection, estate planning, and business planning . Contact an independent life insurance agent that can explain the plan in detail and answer your questions.