Indexed Universal Life Insurance, also known as "Becoming Your Own Bank," provides a dual benefit. It provides permanent life insurance coverage and tax-free investment opportunity. The combination of a death benefit paid to your loved ones with the increase in value of the cash component of the policy without the risk of a market downturn makes these policies an appealing option.
The advantages of an indexed universal life insurance policy include greater potential for increasing the value of the cash component of the policy, depending on the performance of the market, while offering tax-free gains and the ability to take loans from the policy against the cash value without taxes or penalties unlike when borrowing from a 401(K) or IRA. The cash value of the policy accumulating over time does not impact your Social Security benefits and allows you to borrow from the policy to supplement your income if needed.
Individual life insurance can play an important role in your financial planning. It can help provide financial security for your loved ones and also provide estate planning and tax-deferred savings benefits. Death benefits paid on individual life insurance policies are generally federal tax-free and can be used by your beneficiaries for any purpose. Life insurance can be used to create a legacy for your loved ones or important causes you want to support.
Indexed Universal Life insurance provides a dual benefit. It provides permanent life insurance coverage and tax-free investment opportunity. The combination of a death benefit paid to your loved ones with the increase in value of the cash component of the policy without the risk of a market downturn makes these policies an appealing option.
The advantages of a universal life insurance policy include greater potential for increasing the value of the cash component of the policy, depending on the performance of the market, while offering tax-free capital gains and the ability to take loans from the policy against the cash value without incurring taxes or penalties as occur when borrowing from a 401(K) or IRA. The cash value of the policy accumulating over time does not impact your Social Security benefits and allows you to borrow from the policy to supplement your income if needed.
This type of policy lasts for a certain number of years, typically 5 to 30. A term life insurance policy only pays death benefits if the person dies within the policy period. It is a means to ensure that funds for specific purposes, such as college tuition, debts owed, or the mortgage on your home, are covered in case you die during a finite time frame.
As long as you stay current on your premiums, permanent life insurance provides coverage for your entire lifetime. This type of policy is often used for tax and estate planning purposes and for funding trusts for dependents with special needs. Most of these policies have a savings component that allows for the accumulation of cash value on a tax-deferred basis. Typically, the premium of a permanent life policy stays the same for the lifetime of the policy and does not increase as you age.
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