Final Expense & Indexed Universal Life
Protect your family today and plan ahead for retirement.
Final Expense Life Insurance
What it is
Final expense insurance is a smaller whole life policy designed to cover funeral and burial costs, medical bills and other end-of-life expenses. The benefit goes to the person you name, who can use it as needed.
How it works
- Coverage amounts are typically modest, so they’re easier to afford.
- Premiums are generally level for life, and the policy can build cash value.
- Many policies ask only a few health questions, and some accept everyone. Policies that accept everyone often have a waiting period before the full benefit applies.
Is it right for you?
It’s worth a look if you don’t want your family to have to cover these costs out of pocket. I’ll compare your options and explain the waiting periods and limits in plain language. Benefits and underwriting vary by carrier and state.
Indexed Universal Life (IUL)
What it is
IUL is permanent life insurance with a death benefit and a cash value. The cash value can earn interest linked to the performance of a market index, such as the S&P 500. You aren’t invested in the index itself, and the policy is not a stock or fund.
The zero floor
When the index falls in a year, the interest credited is typically 0% instead of a loss, so market declines aren’t charged against your account. In years the index rises, you can be credited with gains up to the policy’s limits.
What to know before you buy
- Gains are limited by caps, participation rates or spreads, so you usually don’t receive the full index return.
- Credited rates vary by carrier and policy and aren’t guaranteed. Illustrations are hypothetical.
- Policy charges come out of the cash value every year, including years credited at 0%, so cash value can fall if the policy is underfunded.
- Loans and withdrawals reduce the death benefit, and heavy use can cause a policy to lapse. Ask your tax professional how it applies to you.
Where it fits
People often look at IUL as a supplement to other retirement savings, for the death benefit and for flexible access to cash value later. It tends to suit people with a long time horizon. I’ll show you carrier illustrations and explain the costs and limits before you decide.