What is the advantage for a policyholder to buy a flexible premium life insurance policy rather than fixed premium permanent life insurance??

  1. 21750 POINTS
    Jim WinklerPRO
    CEO/Owner, Winkler Financial Group, Houston, Texas
    That is a great question! The deal is that it really boils down to how well you manage your money, in my opinion. The sales pitch for a flexible premium policy is that you have the ability to be "flexible" with your payments - you might pay a little more than the premium, skip a payment entirely, or overpay, as you see fit. If you are the type of person that is very closely watching your expenditures, and keeps a sharp eye on your investments, then this policy type can be potentially helpful in the convenience it offers.
    But...If you are like the overwhelming majority of Americans (77% - an unbelievable 77%!!) that live paycheck to paycheck, part of the 66% without adequate (or any) savings, or the 35% with a bill currently in collections, this may not be a good thing. The Bible tells us that while "All things are permissible, not all things are good." That is solid wisdom, in this case. The temptation here is to believe that the "flexibility" offered here provides you with more wiggle room in payments. While that is true to some degree, the truth is that there is a bottom line cost that has to be regularly covered or the policy goes under and lapses. Once it does, everything that you've paid into it goes under also. Sadly, what happens to those who have problems with cash flow and/or money management is that they make payments that cover those costs for a while, but slowly start underpaying or skipping payments, and the result is that the minimum premium payment goes up, it becomes unaffordable, more payments are underpaid or missed, and the policy goes down like the Titanic, taking all your money with it.
    So it is generally my opinion and recommendation that having a single, set premium payment policy is generally a safer bet. If the payment is budgeted for, and prioritized, there is far less chance of the policy falling behind and lapsing. The offer of flexible payments is definitely tantalizing, but then again, most of the things that are bad for us generally are...Bottom line? If you are good with your money and keep an eye on your financial matters, there are times when having that flexibility can be helpful. If you feel that money management may be an area of opportunity for you, perhaps the stability of the fixed premium policy would be a safer choice.
    I hope that helps, if you have any questions, please do not hesitate to inbox me, okay? Thank you very much for asking!
    Answered on August 31, 2015
  2. 4249 POINTS
    Gary LanePRO
    President, Lane Independent Agency, Southern California
    What if you cannot make your premium payment for a bit? With a fixed premium policy, you could lose your policy, or lose your cash value to pay that premium. But with a Flexible Payment Policy, like the EIUL policy sold by Premier Financial Alliance from National Life Group (America's second oldest Mutual Life Insurer) you are fine. Your premiums can vary with no problem. There is a model premium, or modal premium, which you usually make. When times are good you can increase that payment, increasing the amount of cash value your policy accumulates. When times are bad, pay less, down to a minimum, and keep your policy not only active, but still accumulating cash value, although a bit less that month. You policy will continue in force, no gaps, no lapses, and still growing in value. I urge you to talk with us about this great program! Thank you. GARY LANE. 714 422 9616. garylane@cox.net.
    Answered on August 31, 2015
  3. 552 POINTS
    Ruth Ladas
    CEO, RLI - Ruth Ladas Insurance, LLC, Fort Myers, Florida
    As you can see from the previous answers, even insurance professionals have differing opinions on this subject. In my experience, keeping it simple is the best solution. Over the long term, flexible plans just don't work for the average person. The normal consumer is not likely to maintain enough familiarity with their agent or the product to keep these policies in force. My best advice is to buy term and invest the rest.
    Answered on September 5, 2015
  4. 7479 POINTS
    Steve KobrinPRO
    President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
    It’s really not a question of what is better. It’s a question of knowing how to use the flexibility built into the product.

    Universal life insurance can accommodate flexible premium payments. At the same time, it makes available premium guarantees.

    If you overuse the flexibility of the product, you can lose the guarantees. A certain payment commitment must be made to the company if you want them to guarantee the coverage for a specified amount of time. If you overfund, then underfund, then stop paying, then start paying again, odds are you won’t get the guarantee you want for the time you want.

    But if you are smart about it, you can have your cake and eat it too. You can take advantage of the flexibility of the product to come up with a creative funding strategy. So the flexibility is really best utilized in the design stage. Then, when you come up with a payment schedule that is suitable, you make your payment commitment. You stick with the program.

    What kind of payment strategies could you employee with this product?
    The options are many.

    You could fund the policy with a single premium. Make a payment in year one, and then not make any at all. But you still get a lifetime guarantee.

    You could go to 10-year pay, or a 20-year pay, or 30 years pay scenario. Pay the premium for that period only, but still get a lifetime guarantee.

    These strategies allow you to on the one hand, not pay for your life insurance for the rest of your life. At the same time, they still give you the lifetime guaranteed coverage you want.

    Of course, you need to consult with your broker and the company to calculate the correct amounts needed to limit your payments but also get the guarantee.

    Then again, you could just go the route of continuously paying a premium on a yearly basis. You would have to keep paying, but the premium here would be much cheaper than the first two scenarios. So what is your priority? Would it be the lowest annual outlay, or paying the premium for the shortest duration?

    The flexibility of universal life gives you additional interesting options. You could structure the coverage for a defined amount of years. It could be 10 years, 20 years, or 30 years. The premium and the death benefit could be guaranteed for that amount of time. After that, you lose the guarantee.

    Why would somebody do that? Why wouldn’t they just buy term insurance?

    Well, in many cases underwriting concessions are made for permanent insurance that you don’t get with term insurance. The price for universal life could actually be lower than term insurance.

    As a matter of fact, sometimes carriers will offer only universal life insurance and not term insurance.

    The flexibility of this product can really enable you to make your life insurance work to your best advantage. You just have to know how to use it.
    Answered on September 10, 2015
  5. 5877 POINTS
    Stan Cox IIPRO
    Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
    I'm guessing you asked the question the way you did because you heard someone say that flexible premium insurance is better than fixed premium. Here's an experience a client of mine had with a "Flexible Premium Life Insurance". He was told that it was a permanent life insurance that would build cash value and he could have flexibility in how much premium he would pay.

    He had the policy for 20 years and it had indeed grown some cash value, but while he never paid less than the original stated premium the cash value had begun declining in recent years and was down to nearly nothing. Had he kept the policy, in order to keep it in force he would have to increase the premium every year from now on. So my answer to your question is: Flexible premium policies are NOT better than fixed premium policies! (And "buy term and invest the rest" is another piece of advise I strongly disagree with.)
    Answered on September 13, 2015
  6. 11773 POINTS
    Larry GilmorePRO
    Agent Owner, Gilmore Insurance Services, Marysville, Washington State
    Why is flexible life better than fixed premium life? ONLY if it fits your needs and you maintain a close watch on your policy. There is no insurance policy that is better than the other. It will come down to what you need it for. How long do you want it? What do you want it to do? When you look at a purchase of an insurance policy you will find a wide range of policies and prices. The cheapest one to start may very well be the most expensive if you live too long. The most expensive to start with may actually turn out to be the cheapest if you live a long time.

    A flex premium policy will require more diligence from the consumer than a fixed premium plan. Skipping premiums or underfunding a flex plan can and often does lead to policies that self destruct over time. A fixed premium policy by it's nature, is just a steady plan designed for consistent regular premiums.

    A flex policy gives the owner a lot more freedom, but in most cases, not the best idea. In other words flex policies have more risk than a fixed premium plan.
    Answered on September 15, 2015
  7. 723 POINTS
    Everett Debrow, Jr.
    Principal Agent, Patriarch Associates,LLC, Opelika, Alabama
    Excellent question! However, there is no such thing as "better insurance", only insurance that best addresses the need at hand.
    For example, a homeowner wanting coverage that will pay off the mortgage in case of untimely death would be well served with a term plan that covers the span of the mortgage. Someone needing protection while accumulating funds for a specific reason would have their needs met with a managed flexible premium plan. Still another may need to have permanent protection for the family's long-term peace of mind In case a major income source meets their demise. Three scenarios, three possible insurance solutions. And there are actually many more! If you need more information, contact a qualified insurance professional. If I can be of service, don't hesitate to call! Thanks for the opportunity to help!
    Answered on March 10, 2016
  8. 1976 POINTS
    Ronald HinchPRO
    Regional Marketing Director, Capital Choice Financial Group,
    Neither is a good purchase! First of all, life insurance that has a cash value within the policy like whole life, universal life, variable life, flexible premium life are all expensive and a very poor investment. The only life insurance that I recommend to my clients is level term life insurance. With term life you can purchase much more at a cheaper price and put the savings to work on paying off debt and savings for the future. Life insurance covers a temporary need in the early years when debts are high, kids at home, and income is needed. Just remember, buy term and invest the difference and always separate your life insurance from your investments.
    Answered on April 7, 2016
  9. 1976 POINTS
    Ronald HinchPRO
    Regional Marketing Director, Capital Choice Financial Group,
    Neither flexible premium UL or standard UL, or permanent life insurance is a good deal for the consumer. The need for life insurance is only temporary and not permanent because it is protection in the early years where debts are the highest, mortgage is active, and young children are still at home. This is where a loss of income would be devastating. This is the life cycle and only low-cost level term protection allows the bread winners to be protected with adequate coverage at an affordable rate. Buy term and invest the difference is the best thing to do for to provide complete financial stability.
    Answered on August 18, 2016
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