7 Vital Pros and Cons of Index Universal Life Insurance

7 Vital Pros and Cons of Index Universal Life Insurance

by / Comments Off / 242 View / Apr 22, 2015

Generally speaking, there are two ways to generate wealth. The first is to provide a service and be paid. The second is to make your money work for you by investing it. The world of financial tools and investment options can be incredibly overwhelming to a person just starting to invest. From investing in rare earth medals, home equity, or things like stocks and bonds, any pooling of wealth may be a secret financial tool.

The Pros of Indexed Universal Life Insurance

The Indexed Universal Life Insurance provides an opportunity to turn your life insurance savings into an instrument for generating wealth. Along with some notable protection as well as being relatively easy to set up, the Indexed Universal Life Insurance can provide you with additional money when you need it the most. With that in mind, lets examine the pros.

1. Allows You To Increase Your Life Insurance Amount
When your money sits, it does very little for you. If you are lucky to have an interest rate attached to the life insurance amount, then you will at least generate enough to take care of the effects of inflation. If not, then with every passing year your wealth will count for less and less. The Indexed Universal Life Insurance helps to address this by taking some of the money you have invested in a life insurance policy and being able to generate wealth through an investment in various financial tools, including the stock market. You can invest however much you want to invest, allowing the Indexed Universal Life Insurance to be a flexible financial tool that can meet your personal requirements.

2. Principal Amount Usually Protected
Depending on who you go with for your Indexed Universal Life Insurance, your life insurance principal amount will usually be completely protected. So, if you end up investing your money, and something happens during the investment period that makes you have less value then you began with, then your original investment will still be covered. This security is a reason why a growing number of people are willing to take their life insurance policy and invest a portion of it.

3. Relatively Easy An Inexpensive To Set Up
One of the leading reasons why people do not invest their money is because investments are incredibly complicated. With a long list of rules, good practices, vocabulary, and everything else under the sun, even basic investments require a lot of research in order to get right. With the Indexed Universal Life Insurance plan, you can have someone else take care of the investing. In addition, you will have proper coverage regarding your finances in case your investments go sour. As all investing comes with some degree of risk, this tool can’t possibly be any better the eliminating the underling risk.

The Cons of Indexed Universal Life Insurance

While Indexed Universal Life Insurance can provide you with additional income and can be an effective way to make use of funds that would otherwise just sit there, certain risks can pop up with Indexed Universal Life Insurance. Along with the hidden costs and risks associated with using your life insurance funds in this manner, there are also lawsuits, a lack of guarantees, and challenge in accessing the funds in question. Lets take a moment to review them now.

1. Hidden Risks
What might not be apparent the first time you sign up for an Indexed Universal Life Insurance policy are the hidden risks that you may be exposed to. First, there is the chance that you will not make any money depending on how your money is invested. In addition, if you do not have a guarantee that you will never lose your principal, then you are taking consider risks with your savings. In addition, unexpected things can come up that may cause you to lose out. The institution can create a lot of red tape that makes it a challenge to see what is really happening with your money.

2. Hidden Costs
Along with the hidden risks associated with using an Indexed Universal Life Insurance policy, there are also hidden costs that will not at first be apparent. These take the forms of fees and expenses that get tacked on to the overall cost of doing business. For example, if you end up paying $200 in fees for an investment of $20,000, and you make no money back, then your principal is still safe. However, you still lose out on the $200 in fees, resulting in a net loss. Depending on the nature of the fees, you may have to pay for every time you want to withdraw funds from the account, resulting in a great deal of loss over time as a result.

3. Illustrated Values That Are Hard To Access
How certain are you that the amount of money displayed is the amount of money you actually have? With Indexed Universal Life Insurance, you are far removed from what your money is doing. You have very little in the way of guarantee that the money that is being shown is actually there. In addition, you may find it challenging to ensure that the illustrated values are indeed correct. With strong arm sales tactics that are designed to keep your money invested, you may find it a challenge to withdrawal any funds at all without being insistent.

4. Lawsuits
Indexed Universal Life Insurance groups have a long history of lawsuits regarding practices and customer satisfaction. Oftentimes, they will promise the world but provide less then stellar guarantees regarding their overall service. Individuals are then left with the court fees associated with lawsuits.

Where Does This Leave Us?

Indexed Universal Life Insurance represents a potentially fantastic financing tool that will allow you to turn an otherwise stagnant reserve of wealth into something that works for you. The problem however is that this tool is poorly understood by those seeking to use it, allowing for hidden fees, a lack of guarantees, and even behavior resulting in lawsuits. As always when it comes to complex financial instruments, take your time to carefully review what it can and cannot do for you. With that in mind, you will be well prepared to make a decision either way.

This is where Indexed Universal Life Insurance comes in. The Indexed Universal Life Insurance takes a normal life insurance policy and provides the opportunity to invest some if not all of the money in your life insurance policy. So for example, you can have 20% of your life insurance policy be indexed. In this way, that percentage of money works towards growing your life insurance. In addition, it allows you to spend some of the money made through the process. The rest of the life insurance policy remains fixed, meaning that it will not be invested or touched during this process.