Contemplating Variable Universal Life Insurance
Variable universal life insurance is a combination of a life insurance policy and an investment vehicle. It has been designed to help people protect the future of their families through the life insurance, plus it allows them access to professionally invested and managed funds that will accumulate money and can be used for future needs.
The policy can only be used for a selection of planned financial needs including business planning, education, for long-term medical care and as a supplemental retirement plan. As a person’s personal circumstances change so will their life insurance needs. One should make sure that their personal financial strategy is well thought-out and that the risk and time including the associated costs are something they could handle before making a commitment to invest in a life insurance plan.
Fees and Charges
The volatility of the market can affect your insurance premiums. Other than that, variable life insurance has various charges and fees, which include, but are not limited to, the cost of insurance based on the insured’s health, age and gender. There are also some underlying expenses and fund charges, plus the costs of buying insurance riders to better customize an insurance plan to the particular needs of the insured.
People who plan to purchase variable universal life insurance should keep in mind that every kind of investment comes with a certain amount of risk. The investment options offered in variable universal life insurance are not offered to the public directly. All the guarantees and protections offered by the policy are subject to the insurer’s paying ability. If you take money out of your insurance, you automatically reduce both the death benefit and the cash value of your insurance, which can also lead to higher premiums in the coming payment cycles. People should always ensure that their life insurance requirements are met before taking out a loan from the policy.
Your variable universal life policy offers a number of tax-advantaged benefits including income-tax free death benefits for your loved ones, and if structured properly, the death benefits can also be removed from your taxable estate. The investment earnings component of your policy enjoys tax-deferred accumulation so that it could grow faster over a period of time. The insured can transfer funds within the policy’s various investment options tax-free. They can also access cash through the policy tax-free. Insurance companies will never offer tax advice so it would be prudent to consult a tax attorney to put your mind to rest over specific tax concerns you may have.
A Highly Customizable Policy
A variable universal life insurance policy does not only offer life insurance coverage with attractive tax advantages, it can likewise allow you to take part in tested investment strategies as you customize your plan with some optional features. Among these features are strategies that can help you grow your investments and better manage risk through asset allocation, rebalancing and dollar cost averaging. Remember that these strategies will not guarantee a successful investment but they will help boost the cash value of your plan. You can have flexibility in both the death benefits and the insurance premiums to better match your needs. You can also customize your policy by opting for riders or additional protection that comes with additional costs.
You may also purchase a certain type of variable universal life insurance plan that insures two people or what is commonly known as the survivorship variable universal life insurance. This could be ideal if your situation involves succession or estate planning where the death benefit will not be required until the death of the second insured. This can also be an option for couples who cannot qualify for an individual policy for health reasons.
When you finally sit down and meet with your insurance provider, you will get a rundown of the insurance costs and their benefits. From the policy’s cash value and premium, your insurer will deduct industry standard fees to cover the insurance cost, the taxes and other expenses. Some of the costs will include premium charge, administrative charge, mortality and expense risk charge, fund management fees, and the monthly per thousand charge. When you terminate the policy you will also be charged surrender fees that are usually computed based on the period of time the insurance was active.