Adjustable Life Insurance: Pros & Cons of Flexible Premiums
Grasping everything you need about life insurances can be a doozy every now and then. It has many shades and needs a whole lifetime to really master the in’s and out’s of the plethora of options life insurance provides. With adjustable life insurance being a form of permanent life insurance. Unlike a term policy, adjustable life insurance remains in effect for the rest of your life, as long as premiums are paid. However, policyholders are typically able to adjust their premium payments, cash value amount and even their death benefit. Adjustable life insurance is also often called universal life insurance. Flexible premiums are a feature of adjustable life insurance (also known as universal life insurance) that let’s you change your premium payments as your financial situation changes. This can be a plus if you are unsure of your long-term financial needs or if your income oscillates.
Here are some of the pros and cons of flexible premiums in adjustable life insurance:
- Flexibility: You can adjust your premiums to fit your changing financial needs. This can be helpful if you experience a financial hardship or if your income increases.
- Tax benefits: The cash value in an adjustable life insurance policy grows tax-deferred, which means you do not have to pay taxes on the interest earned until you withdraw the money.
- Death benefit: The death benefit in an adjustable life insurance policy is guaranteed, so your beneficiaries will receive the money even if you stop making premium payments.
- Higher premiums: Flexible premiums can be more expensive than fixed premiums. This is because the insurance company needs to factor in the possibility that you will make lower premium payments in the future.
- Market risk: The cash value in an adjustable life insurance policy is invested in the stock market, so it is subject to market risk. This means that the value of your cash value could go down as well as up.
- Surrender charges: If you surrender your adjustable life insurance policy before the surrender period is over, you may have to pay surrender charges. These charges can be steep, so it is important to read the policy carefully before you buy it.
Overall, flexible premiums can be a good option for people who want the flexibility to change their premium payments as their financial situation changes. However, it is important to be aware of the potential risks before you buy an adjustable life insurance policy.
If you are considering adjustable life insurance, you should talk to a financial advisor to get personalized advice. They can help you assess your needs and find a policy that is right for you.