Adjustable Term Life Insurance: Flexibility For Your Future

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that offers flexible coverage. It allows the policyholder to adjust the death benefit, premium payments, and cash value on their policy. This flexibility can be particularly useful for those with changing needs, such as growing families or those experiencing a loss of income. However, adjustable life insurance tends to be more expensive than other types of life insurance due to its adjustable nature.

Adjustable life insurance is a hybrid policy

Adjustable life insurance, also known as universal life insurance, allows the policyholder to change the death benefit, the cost and frequency of premiums, and the cash value of the policy. It includes a savings component, known as the cash value, which grows over time and can be used as an investment account. The cash value often earns interest, but the gains are typically modest.

The key benefit of adjustable life insurance is its flexibility. Policyholders can adjust the premium payments, death benefit, and cash value to meet their evolving needs. For example, if the policyholder is expecting a child, they can increase the death benefit. If they are out of work, they can decrease the premiums to fit their budget.

However, adjustable life insurance is more expensive than term life insurance and requires more active management. The cash value may not be as lucrative as other investment opportunities, and the interest rates are variable and dependent on market conditions.

Adjustable life insurance is a good option for those who want the flexibility to adjust their policy as their financial situation changes. It is particularly suitable for joint policyholders, parents of children with special needs, and high-net-worth individuals who have maxed out other investment options.

It offers permanent coverage

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that offers lifelong coverage. This means that, unlike term life insurance, adjustable life insurance policies do not expire after a certain number of years. Instead, they last for the entirety of the policyholder's life, provided that payments are consistently made.

Adjustable life insurance policies are unique in that they offer the policyholder a great deal of flexibility. The policyholder can adjust the benefits of the insurance policy depending on their current financial situation. This includes the ability to change the amount or frequency of payments, the death benefit, and the cash value.

The death benefit is the amount that the policyholder's beneficiaries will receive upon their death. The policyholder can increase or decrease the death benefit as their needs change. For example, they may wish to increase the benefit following the birth of a child, or decrease it once their children are grown up and no longer financially dependent on them.

The cash value is the savings component of the policy, which grows over time. The policyholder can increase the cash value by increasing their premium payments, or decrease it by withdrawing funds. The cash value can be used to pay premiums or, in some cases, can be added to the death benefit.

The flexibility of adjustable life insurance policies means that they are a good option for people who expect their financial situation to change in the future. For example, someone who has recently had a child or lost their job may benefit from the ability to adjust their insurance coverage. However, due to their higher cost and complexity, these policies may not be the best option for everyone.

You can change the death benefit

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that allows you to change the death benefit. This means that you can increase or decrease the amount that will be paid out to your beneficiaries upon your death. The ability to adjust the death benefit can be useful as your life changes and your financial needs evolve. For example, you may want to reduce the death benefit once your mortgage is paid off or your children are grown up, which will also reduce your premiums. On the other hand, you may want to increase the death benefit due to a life event, such as the birth of a child, which will result in higher premiums.

Adjusting the death benefit on your adjustable life insurance policy may require additional underwriting or an updated medical exam, especially for substantial increases. However, decreasing the death benefit can typically be done upon request or in writing without the need for underwriting. It is important to note that changing the death benefit may also affect the cash value of your policy. Withdrawing or borrowing from the cash value account will reduce the death benefit unless you repay the money. Therefore, it is crucial to carefully consider your financial situation and needs when making adjustments to your adjustable life insurance policy.

The death benefit is one of the three key elements that can be changed in an adjustable life insurance policy, along with the premium and the cash value. The flexibility offered by adjustable life insurance allows you to customise your life insurance to meet your current and future needs. However, it is important to keep in mind that adjustable life insurance is more expensive than term life insurance and may require more active management.

It includes a cash value savings component

Adjustable life insurance, also known as universal life insurance, is a type of permanent life insurance that includes a cash value savings component. This means that the policy has a savings account that earns interest over time, which can be used for various purposes while the policyholder is still alive.

The cash value savings component of adjustable life insurance offers several benefits. Firstly, it can be used as a source of savings during the policyholder's lifetime. The cash value grows based on market interest rates, and the policyholder can withdraw or borrow against this amount. Additionally, the cash value can be used to pay insurance premiums, which can be helpful during times of financial strain. The cash value can also be used to supplement retirement savings or to take out a loan with interest.

It is important to note that withdrawing or borrowing from the cash value savings component will reduce the policy's death benefit unless the withdrawn amount is repaid. Furthermore, if the outstanding loan amount, including interest, exceeds the policy's cash value, the insurance coverage will lapse.

The cash value savings component of adjustable life insurance provides flexibility and financial security to policyholders, allowing them to adjust their coverage based on their changing needs and circumstances. However, it is essential to carefully manage and plan this type of insurance policy to ensure that the policy remains in force.

It is also known as universal life insurance

Adjustable life insurance is also known as universal life insurance. It is a type of permanent life insurance that offers lifelong protection and the flexibility to adjust the policy coverage as needed. This type of insurance is ideal for individuals with evolving life circumstances, such as growing families, career changes, or fluctuating incomes.

Universal life insurance allows policyholders to modify their premium payments, death benefit amounts, and even the accumulation rate of cash value within the policy. This makes it a good option for those who want the flexibility to adjust their insurance coverage based on shifting life events. For example, if you're expecting a child, you can increase your death benefit. If you're out of work, you can decrease your premiums to fit your budget.

The cash value in a universal life insurance policy works as a tax-deferred savings account that can earn a small amount of interest. This account is different from the death benefit. Part of your monthly or annual premium payments goes toward the cash value of the policy, so the cash value will grow over time as you make more payments and the account accumulates interest.

The cash value of a universal life insurance policy can be used in multiple ways:

• As a retirement savings supplement
• For taking out a loan with interest
• For paying premiums

It's important to carefully manage the cash value spending. If you use up the cash value and can't afford your premiums, your policy could lapse. Additionally, tapping into the cash value through loans or withdrawals may reduce the policy's overall death benefit if not repaid.

Universal life insurance is more expensive than term life insurance and the interest earnings are typically modest. It is also more complicated to manage than a policy with fixed premiums. Despite these drawbacks, universal life insurance can be a good choice for those who want the flexibility to adjust their policy as their life circumstances change.

Frequently asked questions