Interest Sensitive Whole Life Insurance
Interest-sensitive whole life insurance is a type of whole life policy which earns its cash value at a variable rate, increasing faster as interest rates do. When interest rates do go up, this policy’s cash value grows faster than traditional policies would allow.
Choose a limited-payment whole life policy which allows for lower premium payments while still providing you with the same death benefit. This option could save money and time.
1. Current Assumption Whole Life
Current assumption whole life is a permanent insurance policy with both death benefits and cash accumulation features, combining whole life features with universal life features for some premium flexibility. Before making your purchase, however, it is crucial that you fully understand both benefits and drawbacks of any type of life policy before deciding to purchase one.
Death benefits of this policy are guaranteed for life; however, its cash value depends on current interest rates. As such, this investment may carry more risk than traditional whole life policies with minimum guaranteed rates; nonetheless it may still be attractive to individuals who can tolerate potential fluctuations and wish to diversify their investments.
Limited-payment whole life policies provide similar coverage as traditional whole life policies but require premium payments over a shorter time frame – for instance 20 years. This option can help those without access to full financial resources afford whole life policies more easily.
Other whole life policies with flexible premiums are variable universal life and adjustable life policies, which combine whole and term life insurance, providing the ability to change face amount, period payments and term as desired during their lifecycle. While such options tend to have higher premiums than their counterparts.
2. Fixed Premium Universal Life
Whole life and universal life policies both offer flexible premiums with savings components that make savings more accessible, as well as providing you with death benefits and cash values you can borrow against or cash out at any time (subject to policy limits). Premiums on whole life policies remain fixed over their lifecycle while those for universal life (UL) vary over time, increasing as you age.
Indexed universal life policies (IULs) allow you to select how much of your premium goes towards insurance costs and insurer fees; any leftover money can be invested into an index-linked cash account, with potential higher returns than traditional life policies.
At the beginning of each year, an interest rate will be declared and your policy’s cash account credited with it. This approach offers lower risk than investing directly into stocks by offering guaranteed annual returns.
As with whole life policies, indexed universal life policies also feature premiums that increase with age; however, if your credited rate doesn’t cover enough costs and fees associated with your policy’s administration fees and costs then withdrawals could have devastating results on both account balance and death benefit – with tax implications possibly occurring as a result of such withdrawals.
3. Single Premium Universal Life
Single-Premium Universal Life, more commonly referred to as SPIUL, is a form of whole life insurance which allows you to make one lump-sum payment and ensure lifetime coverage with guaranteed terms. This type of policy can be an ideal solution for individuals who have large sums to invest but want something without as much market risk exposure.
This type of whole life insurance offers more flexible premium payments and its cash value portion is often pegged to an index which gives it greater flexibility than other policies. However, keep in mind that any growth of your cash value account is not tax-deferred, and any loans or withdrawals could reduce its death benefit.
SPL works by investing your cash value accounts into professionally managed subaccounts containing stocks and bonds, with variable interest rates that depend on how your investments perform based on which options you select from a selection of available investments. It can be an extremely effective means of wealth accumulation, with cash value balances often able to be withdrawn as income; loans from your cash value typically do not incur fees or income tax fees, depending on its terms.
4. Excess Interest Universal Life
Contrary to whole life insurance, flexible premiums and an easier ability to adjust death benefits can be found with this policy type. Furthermore, it can accumulate interest-bearing funds similar to savings accounts while offering loan options – but such flexibility comes with its own risks; such as having cash value decrease if market interest rates decline and no guarantee that there will be at least some minimum rate of return earned on it.
Recent years have seen some universal life policies lapse due to insufficient cash values to cover both insurance costs and fees. To combat this problem, newer universal life policies feature no-lapse guarantees that ensure they will stay active as long as minimum payments are met; such policies are known as guaranteed universal life (GUL).
GUL policies offer the flexibility of universal life with the security of traditional whole life policies; however, it should be remembered that GULs do not build as much cash value over time than regular universal policies would.
Permanent life insurance that’s designed to give investors higher return potential can have greater potential than whole or variable universal life, but may be more complex and provide less protection. Since it doesn’t provide a guaranteed death benefit, its cash value depends on how investments perform over time.