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One of the types of universal life insurance policies available is the Houston TX indexed universal life insurance plan. It’s another version of the universal life insurance plan with a different twist on accumulated cash value. It sits between the conservative guaranteed universal and investment forward variable universal life insurance plans in terms of how risky it is.
This type of insurance plan is optimal if you didn’t want your cash value to grow at the conservative rates that most guaranteed universal life plans offer. However, you should assess what risks you’re willing to take before deciding on this type of insurance plan.
Like with any other insurance plan, before you come to a decision, you should discuss with an insurance agent first to see if this type of policy is beneficial for you. Any of the experts at Best Life Insurance Houston Agency are willing to answer any questions you may have. Give us a call today!
Houston TX Indexed Universal Life Insurance
Indexed universal life insurance plans are easier to understand. Index universal life (IUL) insurance is a variant of universal life plans. It allows the policyholder to place cash value amounts into either fixed accounts or an equity index account. This way, it has the potential to increase cash value without too much risk quickly.
What is an index? In simpler terms, an index is like a group of investments like stocks or bonds. There are some well-known indexes such as the S&P 500 or the NASDAQ-100.
The policyholder doesn’t need to invest the cash value into the market directly but instead uses a chosen index’s performance or interest rate to set the interest rate. Depending on the policy, you may select multiple indexes to divide your cash value into. You can decide the percentage that goes into the fixed and indexed accounts.
When the market has a downturn, you won’t necessarily lose money. Usually, there’s a guarantee that ensures it against losses. On the other hand, there’s also usually a cap on the maximum return you’ll earn.
The Disadvantages that Come with this Plan
With so many benefits, there are also downsides to Houston TX indexed universal life insurance plans. As mentioned before, there’s a cap on the maximum return you’ll earn. If the index you’ve chosen is doing well, you won’t be able to make as much as you could be doing since there’s a ceiling to how much comes back to you.
Depending on which policy, these insurance plans can also come with a variety of fees and costs. Anything from premium expense charges, administrative expenses, riders, fees, commissions, or surrender charges could be among them. Any of these can detract from the return rate offered by your policy.
Another disadvantage is that the amount you earn is entirely based on an equity index. If the index goes down, no interest will be credited to your policy’s cash value. Most investment vehicles use market indexes as a performance benchmark.
Usually, their goal is to outperform the index, but with index universal plans, the goal changes. The purpose of this insurance plan is to profit from the index’s upward movements.
Now, What Is Universal Life Insurance?
Let’s discuss the more common variant of universal life insurance. Universal life insurance (UL), or guaranteed universal life insurance, is, in a sense, a more flexible whole life insurance plan.
What does that mean? Whole life insurance is the most common type of permanent life insurance, and it guarantees a fixed death benefit and premium amount with the plus of some cash value alongside it, of course. A portion of your premiums goes into a savings account included with the policy, and it builds interest at a fixed rate.
Now imagine a plan with most of those features, but the cash value builds differently, and you can use it to your advantage. That’s how most universal life insurance plans operate. With enough cash value accumulated, you have the option to change the death benefit and premium amounts down the line. Hence, it has more flexibility.
Not only that, universal life plans accumulate cash value easier than whole life plans. And that quirk extends to the other types of universal life policies, including indexed universal life policies.
How does your cash value building more easily help? With enough cash value, you could adjust your death benefit and premium payments. Granted, you’ll still have to pay a minimum premium to keep your policy in force, but you could use the cash value to pay for the premium.
That means if you want more leeway in paying for your premium, you could substitute the payments with your cash value. You could skip the payments entirely, letting the interest do the work for you until it runs out. So you’ll need to pay attention, but it is an option.
Is this life insurance plan the right one for you?
First, you should assess how much risk you’re willing to take with the cash value of your chosen policy. If you lean more to the conservative side, this might not be the best fit for you. On the other hand, this may be an option if you’re okay with how typical universal life plans work but want the potential for more cash value.
The most significant difference between indexed universal and guaranteed universal life plans is how their cash value is accumulated. Guaranteed universal life plans build theirs slowly with a fixed interest rate.
Indexed universal plans, on the other hand, builds cash value based on a chosen index’s interest rate. This interest rate can rise or lower with the market’s fluctuations, although, usually, there’s protection in place, so you don’t lose out if there’s a downturn in the market.
Reach Out To Us!
While this plan isn’t for everyone, you should sit down with an insurance agent to discuss all your available choices if you think this may be a viable option for you. It’s an excellent way to answer any concerns you may have about the best option for you and your family. The experts with Best Life Insurance Houston Agency can answer any Houston TX indexed universal life insurance questions.
Houston, TX Fun Facts:
- There are more than 150 museums in the city.
- There is a 27-and-a-half foot intestine on display at the Museum of Health and Medical Science.
- The Art Car Museum showcases cars transformed into works of art, including a gigantic bunny, a bull, and a giant red high heel.
- For more information, visit the really cool website of Houston!