Life can be full of surprises. As a result, it can be important to find a life insurance plan that can respond to the challenges life throws at you. Adjustable life insurance, unlike whole or term life insurance, can shift to fit your life and offer you the plan you need to take care of your loved ones should the worst happen.
What is Adjustable Life Insurance?
Adjustable life insurance is a form of life insurance that allows an individual to customize and even change their face amounts or premiums to provide the coverage they need at a given time. The individual can lower or increase the premiums he or she pays each month as his or her income fluctuates and raise or lower the face amount of their coverage to suit their insurance needs. It is the most flexible of plans and is thus incredibly popular with consumers.
Why Adjust Coverage?
Even in the most stable economic times, incomes can fluctuate from year to year. Leaner years may make paying very high life insurance premiums difficult, if not impossible. Adjustable life insurance allows the customer to lower these premiums to more acceptable rates without losing their life insurance coverage all together. Likewise in more profitable years, the customer can choose to pay larger amounts into their life insurance or even expand the years of coverage to better reflect their improved economic situation.
Another feature of adjustable life insurance is the buildup of cash value. The premiums an individual pays are divided into two accounts: one to cover the death benefits of the coverage plan and one into an investment fund for cash value. Should the customer choose to cash out their policy or take a loan against their coverage, they can tap into these cash value funds without eliminating the benefits they’ve accumulated. Policy holders should be aware if they take out loans on their cash value, they will need to pay income tax on that amount.
The individual can further choose which of the benefits he or she is paying for is more important. If the individual values the option of taking out more cash value, then he or she can pay more into that fund. If the customer values his or her life benefits as more important, then more of the insurance premium can be diverted into that fund.
Unlike variable life insurance, the death benefits in an adjustable life insurance plan are fixed by the terms and policies of the plan. Without renegotiating the entire plan, these benefits do not increase based on the performance of investments or increased premiums. Also, though flexible with premium payments, if you pay too little for too long, your coverage could lapse, costing you your life insurance protection.
Adjustable life insurance is ideal for those who desire a bit more flexibility in their life insurance coverage. In uncertain economic conditions, an adjustable plan can allow a family to maintain life insurance coverage at whatever rate they are able to pay.