A Beginner's Guide To Life Insurance
Understanding life insurance can be overwhelming, especially for those new to the concept. However, life insurance is an essential part of adulting, and it's important to learn about the different types of life insurance. Here's a closer look at some life insurance basics and indexed universal life insurance details.
Are There Different Types of Life Insurance?
There are several different types of life insurance, including:
- Term. This type of life insurance provides you with coverage for a specific time period, usually between five to thirty years. When the 'term' is over, the policy ends.
- Whole. Whole life insurance provides you with lifelong coverage, so you're protected for your entire life. In addition, whole life insurance has a cash value component, which you can access and use in the future.
- Universal. Universal life insurance provides you with lifelong coverage, like whole life insurance. The difference is that you can customize the length and type of coverage you choose. This type of life insurance combines elements of both term and whole life insurance. It offers flexibility in terms of premiums you pay and potential cash value growth.
The type of life insurance policy you choose depends on your individual needs, budget, and long-term financial goals.
What Is Indexed Universal Life Insurance?
Indexed universal life insurance (IUL) is a type of universal life insurance. Like other universal products, you have the opportunity to build cash value over time. However, the cash value growth on an IUL policy is based on changes in an external index, such as the S&P 500 or another stock market index. In other words, you can benefit from the market's positive performance without taking on any of the associated risks.
Overall, indexed universal life insurance offers you the flexibility you need to customize your policy and use it not just as a life insurance policy but as a financial planning tool.
What Are the Benefits of an Indexed Universal Life Insurance Policy?
IUL policies also have living benefits for those who need access to their cash values early due to serious illness or injury. With these policies, policyholders can use their cash values for anything, including long-term care costs, supplemental retirement income, paying off debt, or financing major purchases without having to pay taxes on any withdrawal amounts (in most cases).
Life insurance can be an intimidating topic, but it doesn't have to be. Understanding the different types of coverage available is key to choosing the right plan for you and your current and future needs. Indexed universal life insurance may be a great option if you want both death benefit protection and the potential to build cash value over time without taking on too much risk. Talk to your financial advisor about what type of coverage is right for you.