Indexed Universal Life insurance provides a dual benefit. It provides permanent life insurance coverage and tax-tree investment opportunity. The combination of a death benefit paid to your loved ones with the increase in value of the cash component of the policy without the risk of a market downturn makes these policies an appealing option.
How Indexed Universal Life Insurance Works
The cash investment in the policy will earn interest based on the market performance of a market composite price index such as the S & P 500 or NASDAQ, which tracks the movement of stocks. As the stock market moves up and down, the rate of return on the cash investment will vary accordingly. Many insurance companies offer a minimum guaranteed return rate or place a cap on the upper limit of potential returns.
Why Invest in a Universal Life Insurance Policy
The advantages of a universal life insurance policy include greater potential for increasing the value of the cash component of the policy, depending on the performance of the market, while offering tax-free capital gains and the ability to take loans from the policy against the cash value without incurring taxes or penalties as occur when borrowing from a 401(K) or IRA. The cash value of the policy accumulating over time does not impact your Social Security benefits and allows you to borrow from the policy to supplement your income if needed.
Providing for Your Loved Ones
These policies include a death benefit that is passed to your loved ones tax-free. This ensures they have access to the financial support needed while an estate goes through probate. These policies are also customized to suit the individual. To learn more about using Indexed Universal Life insurance in smart estate and retirement planning, connect with one of our local agents.