Term life insurance quotes may not be the right option for you, choose carefully. An adjustable life insurance policy may be described as a whole life policy with adjustable features. Premiums may be increased or decreased at the policy owner’s request. Likewise, the face amount of such a policy may be increased (usually subject to evidence of insurability) or decreased.
None of the adjustments (changes) made in an adjustable life policy from time to time has any retroactive effect on any of the provisions. Adjustments apply only to the future.
An adjustable life policy has a cash value and the usual features found in a whole life policy. Increasing the premiums of an adjustable life policy could lengthen the period of coverage or shorten the premium-paying period. Decreasing the premium reduces cash values available in the future, shortens the protection period or lengthens the premium-paying period.
Interest-Sensitive Plans
A significant portion of permanent life insurance plans now being provided can be categorized roughly as “interest-sensitive, nontraditional whole life” products. Among them are universal life policies and variable life policies. Free term life insurance quote.
Universal Life Insurance
Basically, universal life insurance functions as the traditional whole life policy and receives the same favorable tax treatment; however, it is essentially level or decreasing term insurance plus an investment (cash value) account.
Its flexibility makes universal life unique. It can be tailored to the client’s financial and insurance needs and altered whenever necessary; there is no need to issue a new policy each time it is altered. For example, premiums and/or amount of coverage may be increased or decreased at the policy owner’s option. Premium payments may be discontinued and the cash values used to keep the policy in force. The policy owner may let the cash values accumulate, partially withdraw the cash values, or surrender the policy for its total cash value. The death benefit may be decreased to a point at which the existing cash values can maintain the policy to maturity. Also, benefits may be prefunded or premium payments may be stopped temporarily and then continued later, so long as the cash values are sufficient to keep the policy in force.
As with any other term life insurance quotes, the policy owner pays a premium, a portion of which is deducted by the company for expense charges: commissions, administration costs, and other company expenses. The balance is credited to the cash values that are invested in the company’s investment portfolio—or may be used to increase insurance protection, at the insured’s option. After the initial premium payment, the status of the policy depends upon how often premiums are paid and how much is paid, the amount of interest earned on the cash values, and whether the benefit level is changed.
Policy owners may increase premium payments within limits set by the insurance company and statutory law. They may skip premium payments or pay level premiums regularly. However, the cash values must be sufficient to pay monthly premiums for the insurance protection when premiums are not paid. The death benefit is not reduced when premiums are paid from the cash values.
The interest rate used for regularly crediting interest to the policy’s cash value will vary, although usually the rate is guaranteed for an initial period of one year or longer. The interest rate generally runs higher than that associated with a traditional life insurance contract. The rate may be tied to the company’s own investment earnings rate of return, the sales of 90-day Treasury bills, or a bond index. Most of the cash values reinvested in medium- and short-term government securities. In addition to the variable interest rate, there is a guaranteed contractual rate in the policy; thus, if current rates fall drastically, the insured is at least guaranteed the contractual rate. Term life insurance quotes.
Universal life insurance offers two death benefit options. Under Option One, the policy owner may designate a specified amount of insurance. The death benefit equals the cash value plus the remaining pure insurance (decreasing term plus increasing cash values). If the cash values approach the face amount before the policy matures, an additional amount of insurance — called the “corridor,” is maintained in addition to the cash values.
As with traditional whole life policies, the policy owner may borrow from the policy’s cash values. The limit is approximately 90 percent of the cash value, and interest rates vary by company. The policy owner may make partial withdrawals; however, enough must be left to pay the cost of insurance, and future coverage may require evidence of insurability. With both policy loans and partial withdrawals, the death benefit is not decreased.
Also, the policy owner may surrender the policy for its entire cash “value at any time; however, the company probably will assess a surrender charge unless the policy has been in force for a certain number of years.
There are many variations of this type of policy—of the interest- sensitive concept of crediting policy owners’ policies with current interest rates. Some involve a combination of term insurance and annuities. Free term life insurance quote. Regardless of the variations, however, an individual will purchase a universal life type policy to provide necessary life insurance protection while, at the same time, having a strong, attractive cash accumulation account credited with current market rates.
