Index Universal Life Insurance Pros and Cons List
Indexed universal life insurance is a type of permanent life insurance policy that provides financial security for those left behind when one is deceased. Under this type of insurance plan, the policy holder is allowed to choose any number of equity accounts to invest in. this means that those who hold this policy, can choose the what part of their funds or percentage of it that they would like to assign to either the fixed or indexed portions. It is basically an off-shoot of the universal life insurance policies with a few more modifications on it that allow the policy holder make money via investments of his funds while still alive and still increase the wealth of the beneficiaries of this policy on the event of death of the policy holder.
The insurance industry is one that has been viewed with suspicion and some people see the emergence of the indexed universal life insurance which is one of its products as just another opportunity to fleece innocent customers. This leads to a comparative study of the pros and cons of the indexed universal life insurance.
The Pros of Index Universal Life Insurance
1. Amount Increases
The amount you put into your life insurance increases. The accepted belief in the financial world is that your money does nothing for you until you send it on an errand. Through the indexed life insurance, a part of your fund is invested for you, thereby allowing you grow your money through the different tools of the financial market.
2. Freedom to Invest
One also has the freedom of investing any amount one is comfortable with.
3. Principal Always Protected
No matter the investments you choose to make or the insurance company you choose to go through, the principal amount of your life insurance policy will always be protected. This means that even if you lose money through a wrong choice in investment, your original fund will still be protected.
4. Funds Are Tax Free
While the funds grow, they are basically tax free.
5. Growth of Investment is Protected
If the policy holder dies prematurely, whatever growth of the investment will automatically be seen as benefits from the policy bought which is then given to the beneficiaries of the policy.
The Cons of Index Universal Life Insurance
1. Not Cheap to Own
Policies like this which look too good to be true probably are not because they do not come cheap. This is as a result of the administrative costs involved in operating this policy because the broker earns commissions when he writes the policy in addition to underwriting and insurance costs.
2. No Way to Verify Numbers
The projections on introduction to the policy are usually not realistic as a couple of high flying numbers are usually just thrown around to make the policy look more attractive. There is no actual way to verify the authenticity of these numbers, so you are virtually testing the waters with both feet.
3. Hidden Fees
There are so many hidden fees that will only be discovered after purchase off the policy.