Fixed Index Universal Life Odds & Ends

by Wes Bridel on October 10, 2012

in Stewardship

Fixed Index Universal Life offers you the ability to grow your assets tax deferred and pull the money out to use at anytime tax free in addition to letting you participate in the stock market’s upside without having to suffer the downsides.  It does all this in addition to the life insurance benefits which attracted you to the policy in the first place.  We’ve covered this concept in two recent posts and wanted to expand and conclude in today’s post…

Loans

One advantage to some Universal Life policies is that they offer Net Zero Loans.  If your policy offers you this, then you pay the same interest to the insurance company for a policy loan that you earn with your money within the policy.  This means the loan has no net cost to you and can safely be taken in any amounts the company allows (based on your cash value.)  This allows you to spend down substantial portions of cash during your lifetime while still leaving a death benefit to your heir(s).

Free Long Term Care Insurance

We mentioned it in the Long Term Care section, but some company offer a powerful rider to these policies that will allow you to access your death benefit while still alive if you qualify for LTC (See the LTC posts for a reminder on how this works.)

This could be a powerful way to maintain dignity in your latter years and keep the family from having to sell off everything you own.

For example, you might be able to access 2% of your death benefit every month for up to 4 years if you so chose.  And this benefit is often very inexpensive or even free up front (with the cost coming only if you decide to exercise the option.)

Similar opportunities exist if you have a critical health need (such as heart attack, stroke, cancer, ALS, etc) with some fixed index universal life policies.

Reviewing Fixed Index Life Insurance

To review, we love this product as a way to achieve superior returns without the risk that typically comes in the stock market.

Imagine a two year period of time where the stock market drops 90% and the following year bounces back 20%.  This might seem unrealistic to you, but we can certainly imagine this with all the economic chaos swirling around.

If you were in the stock market during this time, you would be ruined even if you waited around and received the bounce back up.  If you stayed in the market, you are still down 88% For example, if you had $100 in the market, you would end up with $12 at the end of these two years.  (100-90%=10; 10+20%=12).  In the real world, hardly anyone would have kept their money in the market for that entire period and would have sold at a big loss sometime before the bounce.

If you had owned this product, you would have had a zero percent return in year one and a 15% return in year two.  So you would have had a solid two year return while everyone else is crying.  This is very, very powerful.

While this probably isn’t as powerful a tool as gold or silver for hyperinflation, the right fixed index universal life policy will probably perform a lot better than most other assets, and would probably perform very well during a period of heavy inflation as shown above in our hypothetical of the 1970’s.

This is the 13th post in our series of innovative new insurance products.  You can find the previous posts at: 1) Innovative Insurance, 2) Long Term Care, 3) Long Term Care Solutions, 4) Free Long Term Care Insurance, 5) What is an Annuity?, 6) Immediate Annuities, & 7) Fixed & Variable Annuities, 8) Fixed Index Annuities, 9) FIA History & Promises, 10) High Guaranteed Interest, 11) Fixed Index Life Insurance, 12)  Tax Free Growth, & 13) FIUL Free Loans & LTC.

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