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Indexed Universal Life Insurance – Features, Benefits, and Things to Know

Indexed Universal Life Insurance – Features, Benefits, and Things to Know

Indexed universal life insurance (IUL) is a type of permanent life insurance preferred by people for its cash value component, including a death benefit. The best part about this insurance is that it stays in force as long as the individual stays current on all premium payments or until they reach a maturity date specified in the policy. IUL allocates a portion of your monthly premium into the investment account, which includes index funds.

How it works & pros
Like all the other permanent life insurance policies, IUL has a death benefit. A part of your money goes to the death benefit when you pay premiums on permanent life insurance. Another portion will cover the administrative costs related to your policy and the cost of insuring you. The rest of the amount gets directed toward your cash value account. IUL has a cash value that acts as a savings account.

Death benefit

One of the pros regarding death benefit is that it gets paid tax-free to your beneficiary. However, the life insurance payout does not include cash value payments to beneficiaries. It is this factor that differentiates Indexed insurance from other policies. Its cash value gets tied to the stock market performance. Your insurance company will invest the money in your cash account, which allows it to earn interest. You can utilize the amount to cover the premium once your cash balance reaches a specific point.

Eligibility requirements
Indexed life insurance works well for stock market enthusiasts and those who want to use their policy as an investment source for multiple purposes. One benefit here is that you do not need to be a licensed trader to get cash value life insurance. However, you must understand how the stock market functions and the performance of various funds. You may lose your money if you do not apply relevant strategies to invest your cash value. Try speaking to a licensed agent and consult life insurance reviews before investing in the policy.

Features

Indexed offers one of the best permanent life insurance policies with interesting features like zero fixed interest rates, interest rate guarantees, adjustable premium payments, flexible death benefits, and cash value growth.

Zero fixed interest rate
You do not have to worry about fixed interest rates when you purchase Indexed life insurance. It is because the cash value indexed account does not earn a fixed interest rate. Instead, the specific rate depends on the market index chosen by the insurer. The insurer selects the index and calculates the interest rate depending on the Index’s performance. The life insurance company then credits the interest to your cash value account.

Interest rate guarantee
IUL is widely preferred because of the benefits it provides with its interest rates. Its policies include an interest rate guarantee that ensures the payment of a minimum amount even during lower returns. However, the interest rates that you get are subject to an upper or ‘cap’ limit.

Adjustable premium payments
Every life insurance policy has a planned premium for its clients and customers. However, you can also use your funds to pay premiums if you have sufficient money in your cash value account.

Flexible death benefit
You get flexible death benefits with a universal life insurance policy. You can also lower the benefits at any time of your convenience. However, you may have to pass a medical examination if you want to increase the death benefit.

Cash value access
You may be able to borrow money from the policy in case of an emergency. However, the insurance company will charge you interest for borrowing the amount. You can also withdraw from the cash value account; however, the process may lower your death benefit.

Other benefits of indexed life insurance

Indexed life insurance is tied to the stock market because of which its policies allow a high cash value growth. You can use the accumulated cash to pay your premium. Here is a breakdown of benefits related to indexed life insurance.

Cash value growth

Indexed life insurance provides you with a high potential for your cash value growth. The policy accumulates cash values depending on the current interest rates.

Flexible premium payments & death benefits
In case of a financial crisis, you can use the cash value account to pay your premium. IUL provides you with multiple flexible options to complete your premium payments. The policy also ensures that the assured sum reaches the beneficiaries in the event of the policyholder’s demise, irrespective of whether it is lowered or increased by the policyholder.

Cons of Index life insurance policy
Despite its multiple benefits, there are certain risks associated with the policy as well. You may lose your money in a universal life index insurance policy because there is a chance of a ‘cap’ on the maximum amount earned on your cash value account. Another con is that the policy is expensive compared to other policies.

Summing up, potential buyers opting for indexed universal life insurance will avail of multiple options to buy policies – from term life insurance to investment-driven policies. Indexed is the best example of an investment-driven policy that stays in force until you reach the maturity date. When it comes to IUL, the profit and loss related to the cash value component get tied to an index. Therefore, you can borrow against your cash value via a policy loan. So, why wait? Choose an efficient life insurance policy for yourself and make your future secure in no time!

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Top 4 Car Insurance Companies for Seniors

Car insurance is mandatory for all drivers, and while senior citizens may not get behind the wheel as often as they used to, auto insurance for them too is a mandate. Insurance companies offer special discounts, tailored policies, and perks for senior drivers who might not want to use their car often. Mature drivers can compare and choose best priced car insurance plans from insurance companies that offer them. Best car insurance for seniors  These four companies offer the best combination of affordable premiums, senior-specific discounts, and exclusive policies to save money on car insurance. Nationwide® Nationwide® car insurance rates are 21% lower than the national average for drivers over 60. For a cheaper premium, the insurance company pays for all liabilities related to bodily injury, personal injury, property damage, uninsured/underinsured motorist protection, treatments, and comprehensive collision coverage. Nationwide® also ensures quality customer service, a grievance-free claims handling process, and ranks among the top vendors for customer loyalty. One of the company's key highlights is the SmartMiles program beneficial for senior drivers with limited mileage after retirement. The yearly car insurance premiums are calculated based on the total number of miles driven with SmartMiles. This policy, available in 40 states, is suitable for seniors who commute less than 12,000 miles per year and can still afford to pay for car insurance after retirement. Overall, the estimated savings with Nationwide® can go upwards of $400 each year, given seniors meet all the driving criteria specified by the company. GEICO Due to competitively lower rates, GEICO ranks among the popular picks in best car insurance for seniors. Drivers between the ages of 65 and 85 can benefit exclusively from additional discounts. One of the key highlights of the policy is the guaranteed renewal program. Policyholders aged 50 and above qualify for the renewal program and may avail of the Prime Time contract features. For this contract, the company specifies that policyholders cannot have any operators/drivers below 25 for the insured vehicle. They should not have been involved in violations or accidents in the three years prior to application with GEICO. But this contract is currently available in only 30 states. Policies also cover accident forgiveness and feature innovative usage-based insurance for good drivers with a clean driving record. GEICO offers exclusive discounts for careful driving habits, retired government & military personnel, and owners with multiple vehicles using the same policy. State Farm® State Farm® is a more lenient option for commuters who may not have a clean driving record. Key highlights of the insurance include a usage-based policy and decent rates for drivers with DUI (driving under the influence) violations. Senior drivers with prior speeding records or driving offenses can also benefit from better rates for insurance premiums. Policyholders earn exclusive discounts and rewards with the company’s patented Drive Safe & Save™ program. Download the app and let the company actively monitor driving and overall performance. Those who match the criteria can save up to 30% on auto insurance rates for the year. Senior drivers with good credit enjoy excellent policy renewal scores and pay 22%-24% less insurance premiums than the national average. State Farm® operates in all 50 states, making it one of the best car insurance for seniors. Allstate® Seniors can save a lot on the best-priced car insurance policies with Allstate®. The company is the fourth largest auto insurance provider in the business. Allstate® also ranks among the best for customer service and claims handling processes. One of the key highlights is the pay-per-mile insurance policy that allows seniors to get affordable rates as per the number of miles driven in a year. The Drivewise® program monitors daily driving habits and provides the insurance company with on-time updates. Also, seniors with the best driving score and a good driving record can avail of low premiums. Allstate® offers addons, including accident forgiveness that prevents a premium increase and features loan or lease gap insurance. It also has an exclusive app that lets all policyholders review their profile, make payments, and monitor insurance status on the go. How to choose from the best car insurance for seniors Since most insurance companies offer various senior discounts and special deals to lower the premium rates, it can be challenging to make a choice. So here we've listed a few things you can consider to make the right choice and get competitive rates. Update driver status online After retirement, seniors should update their status from regular commuters to driving only for leisure. Insurance companies offer unique low-mileage plans or pay-per-mile policies for seniors who drive a limited number of miles in any given year. This detail can be updated while requesting quotes online. Learn defensive driving Some states, by mandate, require seniors to learn defensive driving. Drivers over the age of 50 can benefit from lowered premium rates and enjoy exclusive discounts on the quotes for qualifying for this eligibility criterion. Seniors can consider courses offered by AAA and AARP and spend no more than $20 for the short refresher course. Maintain a proper driving record The number of traffic violations and even accidents determines how much of an insurance risk seniors pose. Having a clean record with minimal infractions increases the chances of getting affordable premiums. Those who have multiple priors should alternatively consider applying to insurance companies that offer policies for average drivers. Compare multiple insurance companies Seniors must compare premium rates and check available discounts across top insurance providers in the country. It may so happen that a company may offer reasonable rates but no special discounts for seniors. Understand that insurance quotes are subject to changes deemed fit and necessary by the insurance provider. Please check and read all contract terms before giving any consent.

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An Overview of 401(k) Plans

Saving for retirement is one of the most crucial aspects of financial planning. If you work for the private sector, you cannot expect a paid pension. Meanwhile, the cost of living and expenses will continue to increase, so a good retirement portfolio will ensure do not have to compromise on your lifestyle once you retire. Among numerous ways to achieve saving goals, experts often recommend opting for 401(k) plans. What is a 401(k) plan? The US Internal Revenue Code outlines federal statutory tax law that all legal residents of the country must follow in a fiscal year. Its subsection 401(k) focuses on tax benefit retirement savings plans that employers provide for all employees in the organization. This is a part of the employee benefits that an organization offers. A 401(k) is a fixed contribution-based investment plan that can be withdrawn only after retirement, allowing employees to set aside a secure financial portfolio for the future. Over time, the amount is directly deducted from the employee’s salary with an equal contribution made by the employer for creating the retirement portfolio. The best part is that these investments reduce your taxable income for the year, allowing you to save more. So, you get a unique retirement portfolio that is sponsored by your employer with matching contributions based on the deduction from your salary. Types of plans You can invest in either a traditional plan or a Roth 401(k) portfolio. Traditional investments are only taxable when you withdraw after officially retiring from service. Alternatively, any withdrawals made from a Roth portfolio are exempt from tax liabilities in the future as you do not get the tax saving benefit during employment. Picking the right plan Traditional plans, in comparison with Roth, offer a wonderful opportunity to lower the burden of current year tax liabilities as all contributions to this portfolio are exempt during employment. The former is a breakup tax saving scheme suitable for lower tax slabs deducted upfront each year, while the latter is a lumpsum tax benefit claimed only upon retirement. Both plans have their pros and cons and offer benefits that are suitable for different people depending on their income-earning capacity and tax rate applicable. Employees with a lower income expectation post-retirement will not incur a higher tax liability. So, to double their in-hand spending power, experts advise taking a traditional retirement savings plan so that the tax benefit claimed every year increases their purchasing power. Employees with a higher taxable income will benefit from Roth retirement plans for two simple reasons. First, Roth contributions are deducted from the after-tax income. This means you have already paid any tax owed for the year, so there is no tax on the contribution. Second, any withdrawals made on the Roth plans following retirement will also not be taxable after the age of 59½. So, it is a better choice for high-income earners who may incur other tax liabilities upon late retirement. As tax rates and laws change periodically, experts cannot recommend one plan over the other. Reasons for investing in a 401(k) plan Any type of investment helps secure your financial future. But the following reasons explain why such contribution-based retirement portfolios make for a better option: Helps lower your taxable income as all contributions are pre-tax You enjoy the flexibility to invest more or less depending on your financial standing The earlier you start, the more you save in taxes and build a bigger retirement portfolio You can easily transfer your portfolio from one organization to the other Easy payroll deductions that help you save for the future Contribution limits As of 2022, employers under the age of 50 can contribute up to $20,500 every year. This means your tax liability for the year is also reduced by the same amount. However, employees over 50 can contribute up to $27,000 every year. Similarly, employers who match these contributions should not exceed the annual limit set by the Internal Revenue Code. Also, the total amount, including both employee-employer contributions, should not exceed $61,000 for those under the age of 50 and $67,500 for those over the age of 50. The biggest employee benefit of investing in employer-sponsored retirement plans is that your pre-tax contributions will continue to be tax-deferred till the date of the withdrawal. This means there will be no income tax applicable on the gains as long as the money remains under 401(k) protection. Options after switching jobs If you are already receiving 401(k) tax benefits but plan to switch organizations, the ideal move is to transfer your current account to the new employer. This will enable you to receive all the existing benefits. It is also possible to leave your account with the current employer if they are willing to maintain it indefinitely. However, no further contributions can be made to the account once you quit the organization. Also, this is not a smart move for retirement portfolios with large investments. Alternatively, you can explore the following options: Roll your 401(k) into IRA: This is a straightforward way to avoid being taxed immediately upon withdrawal. The IRS allows 401(k) investments to be moved into Individual Retirement Arrangements or IRAs after withdrawal to let individuals maintain the tax-free advantage. Banks, mutual fund companies, and brokerage firms offer various investment choices that can align with your current employer’s benefits. But the funds should be moved into a new investment category within 60 days after withdrawal; otherwise, the IRS will levy penalties and taxes for missing the deadline. Withdrawing all retirement savings: The minute you withdraw your investment, all amounts will become taxable as per law. An additional early distribution tax may also be levied on top of that for employees under the age of 59½. This applies to traditional plans. With Roth IRA plans, it is possible to withdraw the investment amounts tax-free, but only if you have held the account for at least five years.

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