Life Insurance Lowdown

If you like the idea of a permanent insurance with flexible premiums and options you’d probably like the idea of a variable universal life insurance policy. This type of policy combines features of universal life insurance with investment options, which means, you have the potential for a larger death settlement than you would have with an ordinary policy. Bestsyndication.com reports:

Variable universal life insurance has advantages over other life insurance policies, such as Globe Life Insurance or whole life insurance. With this type of life insurance you get to play the stock market and choose the investment funds where you want to put your money. With universal life insurance on its own, you can’t control how your cash value is invested. When you combine it with variable life insurance, you can switch investments two or three times a year if you wish to get a higher life insurance settlement.

Read more:What’s The Lowdown On Variable Universal Life Insurance?

The most basic reason for buying life insurance is that it serves as a tool for protecting the financial security of your family. However, pitches that portray life insurance as a souped-up tax-advantaged investment and retirement account should be taken with more than just a pinch of salt. CNN.com reports:

Using insurance policies, and particularly variable universal life policies, primarily as tax-sheltered investments can get quite complicated and involve risks that many people don’t understand. And these policies usually come laden with fees that make them quite expensive ways to invest.

Read more: Thinking twice about variable universal life

You’ve probably been asked by your life insurance agent to buy ‘permanent’ insurance such as Whole Life, Universal Life or Variable Universal Life. Their reasons sound quite compelling and you feel that it may be in your best interests to take such insurance. However, there are quite a few things your insurance agent may not be telling you. There are two broad categories of life insurance—term and permanent. The basic idea behind life insurance is that if you die prematurely, there will be a pot of money there to take care of your loved ones. That pot of money is known as the ‘death benefit’.

On the surface, it may seem that there shouldn’t be a lot of difference between the premium on 20-year term and a universal policy with the same death benefit. But reality is quite different. Seniorjournal.com reports:

What your insurance agent isn’t going to tell you is that the commission on permanent insurance can be around 70% of the first year premium and then maybe 5% a year on additional premiums. Commissions on first year term premiums can be as high as 100%. In our example above, the agent will make about $5600 on permanent versus only $1400 on the term. This higher commission is a tremendous incentive for agents to sell permanent insurance instead of term.

Read more: Beware of Universal Life Insurance: Part 1

Today, there are different types of life insurance options available, which can be tailored to suit your needs, station in life, age and other variables. One such form of life insurance is Universal Life Insurance, which is a flexible-premium, adjustable benefit life insurance policy that accumulates account value. The flexibility of this policy allows you to change the amount of insurance as your needs for insurance change. Statefarm.com reports:

One of the benefits of universal life insurance is that you can decide how much life insurance you need — and subject to certain requirements and limitations, you can adjust the death benefit and premium payments to fit your changing needs.

Read more: What is Universal Life Insurance?

While quite a few people opt for term life insurance policies because of the financial benefits it offers, there are quite a few who would still prefer to go in for permanent life insurance. In case you are one of those, you could try universal variable life as an option. Elderlawanswers.com reports:

As the name suggests, variable universal life insurance combines the flexible premiums of universal life insurance with the investment choices of variable life insurance. There is no guaranteed minimum cash value, but most policies have a minimum guaranteed death benefit provided you pay the premiums for a set number of years.

Read more:Choosing a Life Insurance Policy