How Does A Flexible Premium Adjustable Life Insurance Policy Work?
- 1976 POINTSContact Meview profileRonald HinchPRORegional Marketing Director, Capital Choice Financial Group,A flexible premium life insurance policy is a cash value policy which allows the policy holder to pay flexible premiums in lieu of one set premium. The policy is made up of annual renewable term insurance bundled with a cash accumulation account usually touting high accumulations of cash many years in the future. This is what entices many to purchase this type of policy but buyer beware! In this policy the cost of the insurance increases annually and when the cost of the insurance passes the premium that is being paid the cash values begin subsidizing the increased cost of coverage. If premiums are not increased the policy will collapse sometime in the future. To keep this from happening the policy holder must pay a target premium which is usually much higher than the quoted premium when the policy was issued. Again, the policy holder is paying more than he needs to be paying for the coverage. A better alternative to this is purchasing a level term policy and investing the savings outside the policy in an IRA. This is called split-funding and will give the policy holder control of his cash values.Answered on April 17, 2013+71 0+1 this answerflag this answerview more answers by Ronald Hinch
- 0 POINTSContact Meview profileDavid RacichPROFountain Hills, ArizonaA flexible premium adjustable life insurance policy is generally a current assumption universal life contract. It has two sets of rates: current company practice and contractual guarantees. It has three moving parts: the premium, the death benefit and the crediting method (interest rates, indices or separate sub accounts using equities and bonds.) The premiums are paid, the policy expenses are deducted and the earnings are added to complete the accumulates cash values.Answered on May 27, 2013+31 0+1 this answerflag this answerview more answers by David Racich
- 61667 POINTSContact Meview profileSteve SavantPROSyndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale ArizonaAssuming the question is addressing current assumption universal life,here is basic chronology to the mortality mechanics.The word flexibility infers to the ability to modify the death benefit, the premium or both. When a premium is paid int the policy, the policy expenses are paid: policy fee, premium loads, admin charges and the cost of insurance. Whatever earnings of the policy are then applied to the remaining premiums and/or cash values.Answered on August 21, 2013+31 0+1 this answerflag this answerview more answers by Steve Savant
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