There are many different considerations to take into account when you purchase a life insurance policy. Even after you've chosen which type of policy to invest in, you'll still have to consider numerous factors to fine-tune your policy for the unique needs of both you and your family.
Indexed universal life insurance policies are an ideal insurance policy type for some consumers. The following are six considerations to keep in mind when you purchase an indexed universal life insurance policy.
The amount of your death benefit
One of the most important considerations regarding an indexed universal life insurance policy is the amount of the death benefit. While this type of policy will accumulate cash value over time, the value of the policy will take time to build.
You need to determine your death benefit amount based on the financial needs of your family if you were to pass away. Consider how long your dependents will continue to be financially dependent on you. The younger your family is and the more dependents you have, the higher your death benefit should be.
The index you want to invest in
Indexed universal life insurance policies generally come along with a choice of which index or indexes you want to invest in. You should do your research and choose the policies you want to invest in based on how much investment risk you're willing to take and how well various indexes have performed in the past.
The existence of any guaranteed interest rate
Some indexed universal life insurance policies will come along with a guaranteed interest rate. With a guaranteed interest rate, you know that the cash value investments you've made in your policy will increase in value by at least a particular minimum rate on a regular basis.
The total monthly premium payment
The amount of your premiums is an essential detail to keep in mind. You need to budget carefully so that you're sure you won't struggle to pay premiums on time. If you are unable to keep up with premium payments, your policy may be canceled so that your family no longer enjoys the financial protection your policy offers.
The frequency with which index gains are credited to the policy
Your index gains will be credited to your policy on a periodic basis. Indexed universal life insurance policies specify how frequently gains are credited. It's typical for gains to be credited around once a month or year. However, some policies will credit gains even less frequently.
You'll want gains to be credited as frequently as possible so that your policy investments increase in value faster.
The participation rate of policies available to you
You need to be aware of the participation rate of any indexed universal life insurance policy you purchase. The participation rate is used to calculate the increase in value of your policy over time, depending on the performance of the indexes in which you're investing.
A higher participation rate means that your policy will build value more quickly.
For more information, contact an indexed universal life insurance company near you, such as Guillory Insurance.