Adjustable Target Life Insurance: How Does It Work?

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that allows the policyholder to modify the death benefit and premium payments over the course of the policy. It is a hybrid policy that combines features of term life and whole life insurance. Adjustable life insurance offers flexibility to individuals whose life circumstances and financial needs might change over time.

Adjustable life insurance allows changes to the cash value

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that allows the policyholder to make changes to the cash value, premiums, and death benefit. This flexibility is particularly useful for those who may experience changes in their financial circumstances or life situations.

The cash value in an adjustable life insurance policy is an interest-bearing savings component that grows over time. As the cash value grows, policyholders can borrow from it or use it to pay their premiums. The cash value account often earns interest, but the gains are typically modest.

Adjustable life insurance policies allow policyholders to increase or decrease their premium payments within certain limits. This flexibility is beneficial if financial circumstances change, as it allows policyholders to manage their finances more effectively by adjusting premiums to match their income. For example, if you experience a financial hardship, you can pay the minimum premium and then resume typical payments once the difficulty passes. Alternatively, you can pay the maximum premium during the first years of the policy to increase the cash value more quickly.

The cash value of an adjustable life insurance policy can be used in several ways:

• Surrender value: You can cancel your policy and receive the accumulated cash value, although this may be taxable.
• Loan: You can borrow money from the insurance company, using the cash value as collateral.
• Premium payments: You can use the cash value to pay all or part of your premiums. However, if the cash value drops to zero, the policy may lapse.

It is important to note that the insurance company decides when and how often adjustments can be made to the cash value, premiums, and death benefit. Additionally, there may be restrictions on when and how frequently you can adjust your policy. Therefore, it is essential to check with your insurer about the conditions that must be satisfied before making any modifications.

Premium payments can be adjusted

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that allows you to change certain features of your policy after signing up, including the premium payment and the death benefit. This flexibility suits individuals whose life circumstances and financial needs might change over time.

Adjustable life insurance offers flexibility in terms of premium payments. You can increase or decrease your premium payments within certain limits. This is beneficial if your financial circumstances change. For example, if you're going through a period of financial hardship, you can pay the minimum premium and then resume typical payments once your situation improves. On the other hand, if you're currently earning a high income, you might choose to pay higher premiums to build up the cash value of your policy more quickly.

The cash value component of an adjustable life insurance policy is separate from the death benefit. If you pay more than the required premium, the cash value will increase at a faster rate. This cash value can then be used to pay part or all of your premiums in the future, making your payments flexible over time.

It's important to note that the insurance company decides when and how often you can make adjustments to your premium payments. Additionally, you must continue to pay at least the minimum cost for the life insurance to maintain your coverage.

Adjustable life insurance provides the advantage of customising your policy to match your current financial situation and needs. By adjusting your premium payments, you can manage your finances more effectively and ensure that your coverage remains affordable and optimised for your circumstances.

The death benefit can be increased or decreased

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that offers flexibility to the policyholder. It allows the policyholder to make adjustments to their insurance coverage based on shifting life events. This means that the death benefit can be increased or decreased.

The death benefit is the amount paid out to the beneficiary when the insured person passes away. With adjustable life insurance, the policyholder can increase or decrease this benefit as their requirements change. For example, if the policyholder has children who become financially independent, they may choose to decrease the death benefit to reduce their premiums. On the other hand, they may want to increase the death benefit to ensure their beneficiaries receive a higher payout.

Increasing the death benefit may require additional medical underwriting and will result in higher premiums. The insurance company will need to approve any changes to the death benefit. Decreasing the death benefit can be done upon request or in writing and typically does not require underwriting.

Adjustable life insurance policies offer flexibility in terms of premium payments, death benefits, and coverage periods. This makes them suitable for individuals whose life circumstances and financial needs may change over time. The ability to adjust the death benefit ensures that policyholders can provide adequate coverage for their beneficiaries as their needs evolve.

It's a hybrid policy that combines features of term life and whole life insurance

Adjustable life insurance, also known as universal life insurance, is a hybrid policy that combines features of term life and whole life insurance. It is a form of permanent insurance that can last your entire life, provided you keep paying the premiums.

This type of insurance offers the flexibility to adjust your coverage based on changing life events. It includes a savings component, known as the "cash value", which earns interest over time. You can borrow from the cash value or use it to pay your premiums. The cash value can be increased by raising your premium payments, or decreased by withdrawing funds or using the cash to pay the premiums.

Adjustable life insurance allows you to change three components: the premiums, death benefit, and cash value. The death benefit can be adjusted to meet evolving needs, such as increasing the benefit due to a life event like the birth of a child. Similarly, the premium payments can be adjusted to match your income, which is beneficial if your financial circumstances change.

The flexibility of adjustable life insurance suits individuals whose life circumstances and financial needs may change over time. It provides a way to customize your life insurance to meet your current and future needs.

It's a permanent life insurance policy

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance policy. This means that, unlike term life insurance, an adjustable life insurance policy can last your entire life, with no end date. As long as the premiums are paid, the policy remains active.

Like other permanent life insurance policies, adjustable life insurance has a cash value savings component that earns interest. The cash value grows based on market interest rates, and the return can vary from year to year. The cash value can be withdrawn or used to pay premiums.

Adjustable life insurance is unique in that it offers a great deal of flexibility. It allows you to make changes to the cash value, premiums, and death benefit. This flexibility suits individuals whose life circumstances and financial needs may change over time. For example, if you experience a financial hardship, you can pay the minimum premium and then resume typical payments once the difficulty passes.

Adjustable life insurance policies are more expensive than term life insurance policies. They also require more work to plan and manage. Additionally, the interest earned on the cash value may be modest compared to other investment opportunities.

Overall, adjustable life insurance can be a good option for those who want the greatest amount of control over their policy and the flexibility to adjust it as their needs change.

Frequently asked questions