Indexed universal life insurance policies are multi-faceted products that offer both death benefits and retirement savings. The combination makes these policies highly attractive to persons who want reassurance both that they and their loved ones will be taken care of in the future. If you're getting this type of insurance, check these details to understand a particular policy more fully.
The Premium Schedule
The premiums charged for universal life insurance increase as a policy matures, escalating as the policyholder ages and their probability of passing increases. The structure for these policies premiums is such that they're quite affordable early on but can become sizeable later in life — there is a built-in solution for the latter high premiums, though.
Before examining the investment portion of an indexed universal life insurance policy, check its premium schedule. At this point, you just need a chart of how the premium increases over time.
The Index
The "indexed" term in indexed universal life insurance means that the savings portion gets invested in an index. An index is simply a conglomeration of similar stocks, bonds, or other investments.
What index your savings gets invested in will be stated in the policy's terms. Check what the index is, and then look up what the average annual return for that index has been. The issuing insurance company or insurance agent will be able to provide the annual return figures.
With the index's historical return, you can project what the expected return for your savings will be. Again, the insurer or agent should be able to provide projections — and you should look at both cumulative savings and monthly savings.
The Premiums and Savings
Now that you know how the premiums and the savings change over the course of the indexed universal life insurance policy, you can check how long you'll actually have to pay premiums for.
The savings increases should eventually overtake the premium increases, and the monthly interest earned will become greater than the monthly premium at some point. At this point, you no longer need to make the premium payments out-of-pocket because they can be paid with the interest earned from savings.
The date at which monthly savings eclipses monthly premiums is when you can expect to no longer pay for the policy. You'll retain the coverage and savings, while the policy continues to pay for itself in perpetuity — at least until your loved ones collect the death benefits.
For more information, contact a local company, like Guillory Insurance.