One of the most exciting types of insurance that you can buy is Fixed Indexed Universal Life Insurance or FIULI.
Understanding that in general there are two types of Life insurance.
1.Term insurance that might be fixed for a period of 10 to 30 years and builds no cash value.
2.Permanent Life Insurance
While Whole Life Insurance is often considered in the permanent category,
it often will only last to a given age, like 80 Years old and that might be considered your whole life.
Whole Life Insurance can build a small amount of cash value.
The most exciting type of permanent Life Insurance is Universal LifeInsurance within the permanent Life Insurance Category.
Fixed Indexed Universal Life insurance and Variable Indexed Life insurance are both types of Universal Life Insurance. When you see the word Variable, that means that the Cash value is tied to the gains and the losses of a given market Index Like the S&P 500.
The Performance of Fixed Indexed Universal Life Insurance is tied only to the gains of the Index. Unlike investing directly in an Index Fund, however you won't lose money or cash value when the market has a down year. This is because your account's principal is guaranteed, again Guaranteed insuring it against market dips. Most often the trade for not being able to lose your principal is that there is usually a cap on the maximum return that you can earn in a given year. Most policies also offer a minimum fixed rate that you will still earn even in the years where the market has a down overall year.
An Illustration can always show both the minimum guaranteed rate of return as well as a projected return based on passed performance.There are many attractive features to owning Fixed Indexed Universal Life Insurance even if you didn't think you needed life insurance.
Some people have no spouse or family so they can't see the point of having Life Insurance
until they find out that Fixed Indexed Universal Life can solve many of their needs and it just happens to be insurance.
One of the most attractive features of Fixed Indexed Universal Life insurance is the ability totake advantage of the Stock market returns without the risk of loss.
This occurs while building up a death benefit that will be disbursed to your beneficiaries tax free. But there are so many more benefits to consider.
Traditional retirement products such as a Roth or 401(k) have yearly contribution limits, but Fixed Indexed Universal Life insurance Policies have much larger limits based on how much insurance you could reasonably buy and how long you want to pay into the policy.
This is where it gets really exciting, because when you follow IRS guidelines, your distributions are tax free versus tax deferred, like other vehicles mentioned.
When you follow the IRS guidelines then, your cash value grows tax free and you can withdraw it tax free.
As mentioned 401(k) and that is an IRS code is well known.
When you grow cash value inside of a Life Insurance policy, that cash value is no longer considered an investment by the IRS and falls under a different code 7702.
So the object is often to buy as little life insurance as possible but enough to satisfy the IRS requirement in order to grow your money tax free and be able to withdraw it tax free. This is a long term strategy as there is sometimes a significant financial penalty based on contributions in the first few years for surrendering the policy.
Lets imagine the cost of the policy was $4,800 and you plan on contributing a $100 a month. In the first 48 months or 4 years, you have not yet created any cash value. Instead, if for the same $4,800 policy cost, you contribute $10,000 a year for the first seven years? After seven years you will have a significant cash value tied to the gains of the market, up to a cap, but not the losses of the market. What ever the cash value is, you have access to 90% of the cash value to withdraw tax free after the surrender period has passed. You don't have to wait until you are 59 1/2 years old to withdraw the money. If you take out more than the 90% of your cash value, then you would have to pay taxes on the withdrawal as if it was income. If an emergency comes up, you will have access to your cash value money inside of your life insurance policy.
You may have all kinds of reasons to need access to your money.
Maybe you need to buy a car and you would rather pay yourself back instead of getting a bank loan.
Maybe you need money for your childrens college education or money to pay emergency medical bills.
When you want to retire, you can borrow money from the insurance company at a lower interest rate than the cap that your money is growing at.
You don't have to pay back the loans until you die and this creates an ongoing pension like income that would be difficult to outlive.
The umbrella of insurance protects your principal from lawsuits and this is because the IRS does not consider this cash value as an investment. Typically wealth can affect the ability to obtain a student loan for you or your family. Your cost of Medicare and your Social Security benefits can also be affected by means testing but not money that is not considered an investment by the IRS.
Another wonderful benefit is the access to the death benefit that you have after you are approved and have made your first payment.
In this way, you can protect your loved ones if you pass and if you live, you help protect your future financial self.
As mentioned, you can create a pension like income to help you have an income when you are ready to retire.
Different insurance companies offer different flavors of these types of products.
J. Stevens Financial Services can offer you a Fixed Indexed Universal Life Insurance policy that provides the following.
After you are approved for your Fixed Indexed Universal Life insurance policy and you have made your first payment, If you get a note from your Doctor, that you have been diagnosed with a terminal illness and only have 2 years left to live, you can submit your diagnosis to the insurance company to get 90% of your Death Benefit, to do what ever you want to do with it.
What if you get injured in an accident and you can't work but it isnt life threatening? If you were healthy when you got the insurance you will have access to up to 75% of your death benefit to help you cope with your injury.
These are tax free benefits! As with most Life insurance policies they don't pay out a death benefit from suicide in the first two years.