What Is an IUL?
This is an insurance product with an enduring life policy that has a cash value accumulation mechanism designed into it. It is famous for cash accruement advantages and death benefits, as those are what set it apart from most other policies. It also has tax-leveraging opportunities that allow one to either borrow against their policy or retrieve contributions without tax obligations with terms and conditions applying, of course.
An IUS is especially beneficial to young adults with families as there is the option to convert your benefits into annuities to cater to unplanned expenses. Sister products such as term life policies are also preferred among the young for their affordability. Professionals can also leverage other products to pay for career enhancement via further education. Even the elderly can better plan for end-of-life expenses using life insurance expenses. Whatever your age, color, or ethnicity, companies like AfriKare Life have experts to guide you through the intricacies of setup and policy selection. They are proud to serve a robust African American community and are actively working to help people in the Black community build generational wealth and care for their families.
AfriKare also provides solutions that assist pet owners with veterinary costs not covered by insurance. Under their Pet Medical Savings Account, you can even pay for procedures when you do not have pet insurance. Their Pet Medical Savings account allows you to cater for procedures such as:
- Weight management
- Canine claw management
- Sedated grooming
- Parasite control
- Unplanned injuries and ailments
- Dental work
- Ear cropping
Is Indexed Universal Life Worth It?
The key to achieving long-term growth or attaining lengthy financial investment or retirement goals is diversification. Universal life insurance can serve as a vehicle to get you so far, or you can use it for the death benefits of your beneficiaries.
If you are looking for a hedge against future tax rate rises, then this is perfect for you as loans taken against the policy are tax-free. Similarly, if you’re looking for a tool with no age limitations like 401(k)s and IRAs, then this will definitely be worth it for you. More liquidity is especially beneficial for young adults who are trying to build their wealth but have expenses from family needs coming up abruptly.
The funds accumulated in the cash value account are also tax-free and, under certain conditions, can be accessed without taxes or loans. As long as you want to withdraw an amount equal to your remittances, then you will not incur any taxes, but if you go past that and tamper with the interest earned, you are subject to income tax.
If you want something a bit safer than traditional stocks, then consider indexed universal life insurance. The presence of a floor rate protects you from losses unlike in other instruments. Most floor rates for IULs are between 0% and 2%. If the normal stock market fell by 15% and you had $100,000 in the account, you would now be at $85,000. But with IUL, your principle of $100,000 would remain the same, attributed to the floor. In the first scenario, even if the next year is very good, you would first have to recoup your losses before you turn a profit. With IULs, your initial investment is protected, and when the market comes back up you immediately start turning a profit.
How Much Do You Need to Start an IUL?
Vendors have their own percentages thresholds, and costs. These will change from company to company. There are, however, consistent factors that will determine how much your premium costs are.
Age. Just as in most life insurance products, costs are lower the younger you are. Age is one of, if not the most important factors when determining how much your policy will cost. Studies report that more than 35% of life policyholders regret not starting earlier. Rates are usually lower because the insurance companies know that you are more likely to outlive your long-term life policy than an older applicant. Not only that, but they also know that you are going to make many more payments towards a life policy than more mature applicants would.
Medical history. Apart from age, your health is one other big factor that determines your premiums. The healthier you are, the less likely you are to pass away with the policy still active. Thus, you are granted cheaper insurance rates. You may be subject to a medical exam to look into your history of illnesses, pharmaceutical drug use, and smoking habits.
Gender. Ladies find themselves paying less than men owing to a more durable life expectancy. However, moves are being made towards the implementation of legislation that prevents companies from using gender as a determining factor for rates. In states like Montana, it is even illegal to make men pay more than their female counterparts.
Smoking or tobacco habits. If you consume tobacco in any of its forms, whether chewing tobacco, vaping, or plain cigarettes, your life insurance will always cost more than for non-smokers. However, there are procedures in place to correct your rates. Most providers have a default waiting period, usually, a year in which you haven’t indulged, before you can gain access to non-smoker rates again.
How Do I Put My Money in an IUL?
Once you choose a vendor, they will assist you in identifying an index to apply to the cash value account, sectors of your policy, and benefits. When payments are made on the account, a percentage caters to the cost of the policy, and fees, and the rest is remitted to the cash value.
Accruing cash value is topped up with gains contingent on index performance, caps, and participation fees. The indexes and remittances are formulated month-to-month, but fund distribution happens on a pre-selected schedule.
Variations in some policies allow you to select more than one index. IULs present you with a flat minimum rate and choices in the indexes. Index levels are recorded at the start and end of the month. Supposing it has increased, the interest is computed and added to cash value, however, they are distributed on a pre-determined routine stipulated in the policy.