UlTImATE SUccESS GUIdETerm policies are just that, a policy for a specified term. If you have a
short term need like a loan or something of that nature, term is perfect,
or if you simply do not have the financial capability to pay for some-
thing more permanent.
Most of our clients need a long-term solution. There are many choices
out there for “permanent” insurance. We feel like the best two choices
are universal life and index universal life.
Universal life is a permanent product with a flexible premium and death
benefit with a projected interest crediting rate determined by the com-
pany. It also has a guaranteed rate. Most “guaranteed” interest rates are
in the 2%-3% range.
Index Universal is similar in that it also is a flexible premium and face
amount product. The difference is that the interest credited is based on
some index. Usually this is the S&P, but there are many choices avail-
able. The crediting on index products is usually limited by some kind
of a “cap”. This determines the maximum return you could have in any
one given year.
If you are buying permanent coverage, ALWAYS buy a guaranteed
product if you are buying it for the death benefit.
If you are trying to decide if you should buy index universal or regu-
lar universal life for long term insurance coverage, always look at the
GUARANTEE not the projection! I have been in this business for over
27 years. I have seen several thousand life insurance statements over
that period of time. I have never seen a statement on an existing policy
more than a few years old that matched the original projection shown at
the time of sale. That’s right, never.
I am not saying that somewhere they don’t exist, all I am saying is in 28
years and after looking at several thousand, I have never seen one (kind
of like a unicorn or bigfoot).
If you are trying to decide what policy is better between regular univer-
sal and index universal and they both have the same guarantee to age
120 (most permanent policies today project to age 120) pick the index
product. Since they both guarantee to age 120 the index product has
a much better chance of producing a greater cash value. This can be
handy later down the road for various reasons.