Getting life insurance is a great way to prepare for the unexpected, especially if you’re the primary income-earner in your family. It can help your loved ones cover financial obligations after you pass away. With so many policies available, it can be hard to choose the right one to meet your needs.
What if You Terminate Your Policy?
The cash surrender value is the amount of money the company will pay if you voluntarily terminate the policy before it’s mature or you pass away. The cash value is the policy’s savings component. Before you purchase one, spend some time researching the cash surrender value of life insurance. Depending on how old your policy is, the surrender value might be less than the savings component. If the policy is still young, the issuing company might deduct fees if you terminate it. But depending on what kind of policy you have; you might be able to get the cash value during your lifetime. Remember that this can reduce the death benefit.
Guaranteed Universal Life Insurance
These policies offer a certain amount when the holder passes away, and your payments won’t change. There isn’t much cash value in the policy, and you have to pay on time or you risk forfeiting it. Because of this, you won’t get anything if you forfeit it. One of the advantages is that it is not as expensive as whole life insurance, and you can choose an age where you want to get the death benefit, like 95 or even 100. But if you are late with bills, this might not be the best option. Remember that health or financial issues can cause you to miss payments.
Indexed Universal Life Insurance
This kind of insurance has a cash value and links it to a stock market index. A formula outlined in the policy determines your gains. The amount increases over time, and since it is linked to the stock market, you’ll benefit if the stock market goes up. The death benefit and payments are flexible within limits. There are some limitations to stock market gains. Understand the participation rates and fees, as well as the restrictions on your return. The policy tells you how much of the cash value participates in gains. For instance, if that rate is 80 percent and the stock market goes up by 10 percent, you’ll get an 8 percent return. Luckily, if the index goes down, you will get no return instead of losing money.
Variable Universal Life Insurance
This type of insurance works by tying the cash value to investments, like money market accounts or bonds. Based on the market, there can be a high risk to your investment, but if the policy has cash value, you can take loans or partial withdrawals against it. There’s a chance that you can gain a lot if you make the right investment choices. However, it does take some hands-on effort to manage it. The amount can change every day, and administrative fees can be deducted from the payment.