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Cash Value Life

Which is Better Whole Life or Indexed Universal Life? Read below or call us today for us to help you decide!

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Whole Life

Life insurance shopping used to be a decision between a less expensive term policy that was like “renting” life insurance and when the term expired, the policy ended or needed to be converted to a permanent whole life policy. Typically, term was more economical and whole life was a bit more expensive and often required payments through the life of the insured.  Whole life is a permanent policy.

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Universal Life

The primary difference between the family of Universal Life products and whole life insurance is flexible premium.

Universal Life products were introduced as a permanent policy that allowed for flexible premium to build cash value at a faster pace than a whole life policy.


Universal Life comes in three varieties:

Other benefits of whole life, in general, include:

•    Guaranteed earnings: Most carriers typically offer guaranteed minimum earnings to be credited each year.
•    Earnings as dividends: Dividends are calculated based on the parameters that the carrier defines in the policy and often tied to the carriers’ earnings. If earnings exceed the defined goal, then owners receive that as part of the annual credits.
•    Builds cash value: The combination of premiums paid, and dividends earned builds a cash value over time.

•    Universal Life: As noted, the UL was introduced primarily as a whole life alternative for those that might want to have the option to add additional funds to the policy for additional future cash value. This allowed the owner to see value beyond just the death benefit. However, most agents continued to write the policies with a flat death benefit and only a fraction of the agents stayed with their client to help them to understand what it means to have a cash value.

•    Variable Universal Life: The VUL can be offered by an insurance agent with a securities license. The earnings of the policy are tied to the performance of the market. There can be uncapped highs and losses depending on market performance. The combination of having a flexible premium policy building value based on market performance plus having the death benefit can fit nicely for someone in a position of assuming some risk.

•    Indexed Universal Life: The insurance industry designed the IUL to combine the opportunity for market performance without the risk of assuming loss in the market. Earnings are calculated based on the performance of the indexes that are tracked and credited each year. The least that is credited annually is 0%.  This is called the zero floor. This works because the policy funds are not actually put into the market in these indexes. The indexes are a calculating mechanism only. The carriers don’t assume a loss and don’t have to pass that on. 

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