It’s a flexible option that combines a death benefit with a savings component, growing your cash value tax-deferred. Here are its 5 key benefits:
1) Premium Payments:
✓ Flexibility: Policyholders can adjust their premium payments within certain limits. They can pay more to build cash value faster or pay the minimum required to keep the policy active. ✓ Allocation: Part of each premium goes toward maintaining the death benefit (cost of insurance and administration fees), while the remainder goes into the cash value account.
2) Cash Value Growth:
✓ The cash value grows based on the interest credited to the account. The interest rate may be variable, fixed, or index-linked (as in IUL policies). ✓ Tax-Deferred: Cash value grows on a tax-deferred basis, meaning no taxes are owed on earnings until they are withdrawn.
3) Policy Loans and Withdrawals:
✓ Policyholders can borrow against the cash value or make withdrawals. Loans typically have lower interest rates than other types of loans. ✓ Impact on Death Benefit: Loans and withdrawals reduce the death benefit if not repaid.
4) Cost of Insurance (COI):
✓ The COI is deducted from the cash value and generally increases as the policyholder ages because the risk to the insurer increases.
5) Policy Adjustments:
✓ Policyholders can adjust the death benefit and premium payments according to their financial situation and needs, keeping the policy more adaptable than traditional whole life insurance.
Ideal for those seeking both protection and savings with flexibility.
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