Adjustable Life Insurance

Adjustable life insurance is sometimes referred to as “universal life” insurance. It’s a permanent life insurance, meaning that some of the premium you pay is invested. The investments help you grow value. Adjustable life insurance features:

Death Benefit – when you purchase an adjustable life insurance policy, you select a beneficiary to receive the death benefit when you die. The death benefit should not cause the beneficiary to owe federal income taxes on the amount of the benefit, and the benefit is free from probate costs and is protected from creditors in the event of a bankruptcy. When planning an estate, many people select adjustable life insurance because of these important features for the beneficiary. No one wants to leave behind money that causes the beneficiary to pay exorbant taxes or lose it if they’re filing bankruptcy!

Flexible Premiums – with adjustable life insurance, you pay the initial premium and then after awhile, if the amount of your premiums that is being invested is growing, you can use that value to pay your future premiums. Eventually, an adjustable life insurance policy could pay for itself.

Cash Value - as the invested premiums accumulate value, it’s held in what is called an accumulation fund. From this fund, the owner of the adjustable life insurance policy can withdraw the cash value, and the amount taken as a withdrawal is deducted from the policy’s cash value. In some cases, you pay it back like a loan, and in other cases you just reduce the value of the policy. A great benefit of an adjustable life insurance policy that has built up cash value is that it can be used as an asset when you are applying for a loan, mortgage, or other type of financing. You can use it as collateral to secure financing in some cases.

If you’ve had life changes after obtaining your adjustable life insurance policy – such as having had children for example, you might decide to get a policy rider. A policy rider is a modification to your existing life insurance policy that gives you additional coverage not previously included. You might add the children to the life insurance policy, or obtain a double indemnity rider to pay twice the amount of the policy if you should die accidentally. You can get a waiver of premium rider, which allows you to stop paying life insurance premiums if you are disabled for a certain period of time before you reach 60 or 65 years old – but the policy remains active.

A policy rider will typically increase the amount you are paying for life insurance, but you should determine whether the extra cost is worth the additional benefits provided by the rider.