As parents, we all want to make sure our kids’ futures are secure. And not just the set-up-a-college-savings-account kind. The make-sure-they’ll-be-okay-if-you’re-gone kind.
It might be time to turn to insurance and set your child up with an indexed universal life policy—the safety net you never knew they could have. Indexed universal life (IUL) insurance offers both the comfort of life insurance and a savings element with a market tie simultaneously.
So, today, we’ll review the benefits and challenges of using IUL to secure your child’s financial future.
What Is an Indexed Universal Life Insurance Policy?
Indexed universal life insurance combines the permanence of life insurance with a savings feature that tracks with the performance of stock indices. Essentially, it allows you to tie your money to a stock index like the S&P 500, giving it the potential to grow with the market. And if the market goes down? You’re protected from any losses due to market volatility with a 0% floor.
IUL is like a shiny new hybrid car that faithfully serves its traditional life insurance purpose and, with its savings battery, keeps your future trips in mind. IUL offers extra flexibility to adjust your coverage and premium as your financial situation changes.
Why Should You Consider an IUL for Your Child?
You’re probably thinking: I should purchase life insurance for myself to protect my family. But wait, can I open an IUL for my child? Yes—you can buy an IUL policy for yourself or your child, which could be helpful.
IULs are designed to last, so for your child, having an IUL offers them tax-free growth on savings in the policy. That money remains tax-free if they use it as collateral for tax-free loans down the road, for future expenses like college or a down payment on a home.
You see, the cash value grows, building up over time, and can be used later in their lives. And in the market’s bad years, your policy has a 0% protective floor to protect your principal.
As mentioned, it also allows you to adjust the premium payments as needed, making it adaptable to changes over the years. After all, life changes, and IUL can act as a financial cushion to help with unexpected costs like health emergencies.
If you are the policyholder, rest assured that it offers excellent protection for your child through the death benefit and a growing asset in the form of an income-tax-free death benefit to help support your family through any financial needs after you’re gone.
The death benefit is a lump sum payment to your child or other beneficiaries to help them maintain their lifestyle, pay for tuition, or manage future financial challenges. It lifts your family toward the future, a dollar at a time.
What Are Some of the Hidden Advantages of IUL?
Choosing IUL is choosing a more strategic method of financial planning. For example, IULs even let you borrow tax-free from the carrier, with loans that use your cash value as collateral. It depends on the terms of your policy, but they can be a lifesaving source of funds when you need the money most.
The benefits are adjustable, so when life changes happen, like having more kids or switching careers, your policy’s benefits can evolve with your financial goals. IULs allow for planning with the potential for significant growth without risking losses due to market downturns, as traditional stocks could.
Indexed universal life insurance is like an all-in-one utility workshop with all the tools you need to manage your family’s future.
Are There Risks to IUL Policies?
Yes, IUL policies can be pretty complex at their core, so understanding how they work—from index performance to caps on growth—can be quite a turnoff for some.
And their market dependence will raise some eyebrows—and blood pressure levels. But remember—IUL is designed to protect from market downturns. Of course, it still depends on the market, so at times, it won’t grow as much as you want to see. And even with the 0% floor, you may even have years where you lose a bit of money since you’re still paying fees.
It’s great to have the flexibility to change your premium rates as needed, but missing payments or taking out too big of a loan from the cash value could impact the long-term health of the policy.
There’s no such thing as a risk-free plan, but simply searching, “Where can I open an IUL account?” may also be the greatest gift a parent can ask for, with the peace of mind of knowing there’s a built-in cushion for you and your children when life doesn’t go as planned.
How Can You Get Started with IUL for Your Child’s Future?
You can start weaving an IUL safety net for your child by searching for the right insurance provider. Look for an IUL specialist in Utah with transparent fees and strong customer service ratings who wants to help you understand policies more than they try to sell you on them.
Before you sign on the dotted line, clarify any details you need with the insurance specialist. Read the fine print to decide if the expected cash value performance is what you’re looking for.
IUL is ideal for parents who want to leave something for their children or set them up with a savings system that can provide long-term stability.
Consider your family’s needs and what you want for your kids, and act today to lock in financial peace of mind and set them up with something they can fall back on—you’re the financial superhero.