What is flexibile limit life insurance?
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Asked September 10, 2012
A flexible premium whole life insurance policy is a special type of whole life insurance which offers the policy owner all of the benefits of a universal life insurance policy along with premium options that allow you to fit the policy into your budget. Flexible premium life insurance includes a death benefit as well as the financial vehicle people expect from a permanent life insurance policy.
With a flexible premium life insurance policy, you have the option of paying the defined premium or making premium payments within a specified range. This means that you could make a larger premium payment when you have extra cash to invest, or cut back your payments to a minimum when times are tough. The amount you choose to pay in will not affect the death benefits, but they will affect the savings portion of the policy. This means that when you pay the minimum amount, your earnings potential will not grow, but you can make it increase aster by paying more than the minimum premium cost.
Depending on whether you have the option of choosing your own investments for the policy, your rate of return will either be fixed or variable. If you select your own investments, you will receive a variable return based on the performance of your selections. If the insurance company makes the investment decisions for you, then you will generally have a fixed rate of return, regardless of how the investments of the policy perform. The amount of the cash accrual in the policy will depend on both the amount of your premiums and how well the selected investments perform. Even if the investments perform poorly, you can still build up cash value in the account by increasing the amount of your premium payments,
On the surface, flexible premium life insurance policies are more affordable because you have control over the premiums. On the other hand, the policy tends to carry higher fees and handling charges to compensate for the additional overhead of managing the policy. So the policy gives you flexibility in what you pay into it, but your base premiums will tend to be higher than if you had purchased, for instance, a term life insurance policy.
Answered September 10, 2012 by Anonymous