Fixed UNIVERSAL LIFE INSURANCE
What is Fixed Universal Life Insurance?
Fixed, or basic universal life insurance, is permanent life insurance coverage with a savings element that earns a fixed income market-based rate of return and flexible premiums.
Uses of Fixed Universal Life Insurance?
People who buy fixed universal life insurance want long-term death benefit protection, coupled with the ability to make flexible premium payments to maximize the policy’s cash value, which generates steady returns.
Uses of fixed universal life insurance include:
- Provide death benefit protection to a family or business.
- Create a tax-advantaged fixed-return asset that allows the policy owner to manage interest-rate risk due to the contract’s no-loss provision.
- Hold an asset that has the ability to “self-fund” without additional premium contributions if the policy owner becomes disabled.
- Create a tax advantaged source of income in retirement while leveraging the death benefit for other goals, such as Social Security retirement, and delayed income credits.
- Business insurance allows the company to provide various benefits to key employees and protects the business from losing their services.
How does fixed universal life insurance work?
When a policy owner pays the premium for a fixed universal life insurance policy, part of the premium is allocated to pay for the cost of the term life insurance in the policy, and the rest goes into the general account of the insurance company, which invests the proceeds to earn interest for the policy owner.
If the policy owner does not pay the premium, then the cost of insurance to provide the death benefit is deducted from the cash value. As long as the cash value exceeds the amount of premium due, either from earnings or additional payments, the policy stays active.
