Universal Life (UL)
Universal Life – Universal life insurance is a permanant policy that combines permanent protection with an investment component. A portion of this account is used to cover the cost of insurance and any other monthly charges. The other portion represents your cash value. This can grow based on the interest accrued to policy.
• Protecting your family’s financial well-being,
• Accumulating cash value to supplement retirement income.
• Offer tax-advantaged access to emergency cash needs.
There are different types of Universal Life Policies.
SMART Universal Life insurance is designed to help you reach your goals and get the most out of your changing life. It’s an all-in-one life insurance solution giving you flexibility, the opportunity to save for the future, and affordable protection.
Indexed Universal Life – is another type of permanent life insurance, that has a cash value component in addition to a death benefit. The money in your cash value account can earn interest based on an index chosen by your insurer. Funds do not earn a fixed rate of interest but typically come with an interest rate guarantee. Instead, your rate of interest is based on a market index chosen by your insurer. According to the Securities and Exchange Commission, an index tracks the performance of the specific basket of investments, such as stocks or bonds. Your insurer selects the index, and then calculates an interest rate based on the performance of the index, says the NAIC. Your insurer then credits that interest to your cash value account.
The NAIC also says that most policies typically include an interest rate guarantee, so a minimum interest rate is paid even if the index produces lower returns. However, interest rates are usually also subject to a “cap” or upper limit.
The Insurance Information Institute suggests that permanent life insurance may be a good option if you want lifelong life insurance and want to build your cash account over the long term. The NAIC points to the fact that indexed universal life insurance offers both potential for growth based on the market, as well as protection from losing value if the market falls.
There are different Indexed Universal Life options to choose from are subject to the terms of the insurance contract. However there are several other common features of indexed universal life insurance, according to the American Institute of Certified Public Accountants (AICPA).
Adjustable premium payments (within limits) – Your policy will likely specify a planned premium for you. However, if you have enough money in your cash value account, you may be able to use those funds to help pay your premiums.
Adjustable death benefit – Death benefits are typically flexible with an indexed universal life policy, and you can usually lower them at any time. However, increasing the death benefit may require you to pass a medical examination.
Access to cash value – In case of emergency, you may be able to borrow from your indexed universal life insurance policy, although you will likely be charged interest for doing so. You may also be able to make withdrawals from your cash value account. However, doing so may permanently reduce your death benefit. If you don’t maintain a large enough balance in your cash value account, withdrawals may also risk causing your policy to lapse.
Income Advantage – What Is It?
Income AdvantageSM Indexed Universal Life (IUL) is first and foremost a life insurance policy that pays an income tax-free death benefit to your beneficiaries upon your death. Your income helps provide for those who count on you. Income Advantage helps protect your loved ones from the financial consequences of your death by helping replace lost income, pay for college expenses or cover any expenses that come due.
Income Advantage also has an accumulation value that can earn interest. You can select from a variety of interest crediting strategies that are based on the performance of a market index, as well as a fixed account. Any interest you earn on your accumulation value will be tax-deferred. You can also access your policy’s cash value through income-tax free loans and withdrawals. This money can be used to help pay for a child’s college expenses, to help supplement your retirement income, for emergency expenses that may arise or for any reason you choose.
A summary of the tax advantages: – Income tax-free death benefit1 – Tax-deferred cash value accumulation – Policy loans and withdrawals that, depending on timing and amount, may be tax free.
Income Advantage helps you financially protect your family and potentially grows cash value for your future use. It can be a good feeling knowing you’ve helped provide financial protection for your loved ones, and help you live life full throttle.
Annuity
An annuity is a long-term contract you purchase from an insurance company that’s a retirement plan designed to help accumulate assets to provide income for retirement to protect you from outliving your income. Annuitization of what you contribute is converted into periodic payments that can last for life or a specified amount of time.
Most people either out- live their income or have to continue working even after retirement to be able to pay their monthly household expenses. However, investing in an annuity is a solution for that problem. Investing in an annuity, is a way to ensure you’re able to receive income for later in life after you retire.
There are different annuity options to choose from so the annuity payouts are subject to the terms of the insurance contract. There is also annuity products that has immediate payout as well. Annuities do have limitations. Early withdrawals of some annuity products occur penalties and earnings are taxable as ordinary income.
What Annuity option is best for you?
Whether your needs are immediate or long-term, you can choose the type of annuity that has features that will work for your situation:
Immediate – An immediate annuity is usually purchased with a lump-sum and guaranteed income starts almost immediately. Your investment converts into a guaranteed stream of income that is irrevocable once payments begin. In some situations, funds can be accessed, but some restrictions apply.
Variable – With a variable annuity, you choose investments and earn returns based on how those investments perform. You can choose investments that offer different levels of risk and potential growth, depending on your investment goals and tolerance for risk.
Fixed – With fixed annuities, the principal investment and earnings are both guaranteed and fixed payments are made for the term of the contract.
Fixed Indexed – This special class of annuities yields returns on contributions based on a specified equity-based index. Indexed annuity contracts also offer a specified minimum which the contract value will not fall below, regardless of index performance. After a period of time, the insurance company will make payments to you under the terms of your contract. A fixed indexed annuity is not a stock market investment and does not directly participate in any stock or equity investment.