If you’re getting around to researching life insurance, you’re probably a bit overwhelmed. Life insurance can be a complicated topic, and you might have difficulty figuring out what type of policy is right for you. It’s a good idea to do the research and learn about the various policies.
What is Whole Life Insurance?
This type of insurance provides protection over the course of your entire lifetime. You pay your premiums up until the point of your death, and your beneficiaries receive the benefits after you’re gone. This type of policy can also accumulate cash value over time. In certain circumstances, you can borrow against this value, giving you access to resources you can use during your retirement.
The Benefits of Whole Life Insurance
- Your premiums will not go up as you age.
- The benefits are guaranteed to stay in place if the premiums are paid.
- It provides family members with financial assistance that is readily available after you pass away.
- There is cash value that you can borrow against.
- The death benefit stays the same throughout the lifetime of the policy, which helps to ensure that the policy owner can afford to keep paying the premiums up until death.
The Negatives of Whole Life Insurance
- There is no flexibility with the premiums.
- Interest rates are not guaranteed.
What is Indexed Universal Life insurance?
Compared to whole life, which has been around for ages, this type of policy is relatively new. You pay a premium, part of which goes toward the death benefit. The other part goes into a cash value account, which can earn interest based on stock market gains. You can adjust how much you pay each year by accessing the cash value of the policy. However, you will need to meet a minimum premium amount.
The Benefits of Indexed Universal Life Insurance
- There is great potential to earn higher interest.
- You’ll have the option of borrowing against the cash account later in life.
- You decide how much of your premium goes toward the insurance benefits and how much goes toward the savings account.
- There is the option of skipping payments provided you have enough cash value to cover your expenses for that month.
- The possibility of increasing or decreasing the benefits as needed.
The Negatives of Indexed Universal Life Insurance
- Your earning potential is dependent on equity performance.
- Due to the flexibility of the premiums, there is also the potential for them to rise over time.
- The contracts involve complex derivative investments.
Making a Decision: Whole versus Indexed Universal Life Insurance
If you’re looking for a simple and easy-to-understand life insurance policy, whole life is probably your best bet. If you’re looking for a way to have both life insurance and invest in money-making opportunities for the future, you might prefer to go with an indexed universal policy.
If you’re leaning toward an indexed universal policy, you should wait until you have a firm understanding of how indexes work. You’ll also want to look at data that provides a realistic rate of return. When in doubt, ask your insurer questions. Take notes, do the research and allow yourself enough time to make a proper decision. Buying life insurance is an important step toward your future, so it’s crucial to make the right choice the first time around.