Many people love how flexible Index Universal Life (IUL) insurance is—you can change your payment amount whenever you want! But did you know that making the wrong payment changes could cost you your policy and your money?
Let’s break down the biggest mistake you can make with your IUL and how to avoid it.
The Worst IUL Mistake You Could Ever Make
Choosing an IUL for its flexibility can be great, but changing your payments too much, especially by lowering them, can be a risky move. Here are the three most important things to know to keep your IUL safe and growing for you.
Why Lowering Payments Can Hurt You
If you cut your monthly payment and keep it low for too long, you risk losing your policy and all the money you put in.
Your planned payment—or ‘planned premium’—is set to pay for the insurance and keep the policy healthy. Dipping below this amount too often or for too long can cause your IUL to lapse.
If your health changes, you might not even qualify to get it back!
Know Your Minimum (and Maximum) Amounts
Always find out the lowest amount you need to pay to keep your IUL active. This is called the minimum guaranteed premium, and it pays for your insurance each year.
If you’re not sure what this number is, you can check with your insurer or agent. Going over your planned payment is always okay (just stay under the yearly max to avoid taxes), but going below the minimum can end your coverage fast.
Don’t Use the Minimum Long-Term
If life gets tough and you must pay less for a short time, that’s usually fine. But if you can only pay the minimum most of the time, an IUL might not be the right fit for you. Consider other types of insurance instead.
Keeping payments close to your planned premium is the safest way to enjoy all the IUL benefits, including cash growth and life insurance protection.
FAQ About the Worst IUL Mistake
- What happens if my IUL policy lapses?
If your IUL lapses, you lose both your life insurance protection and the money you’ve already paid in. If you have had you policy for a long time you may be able to keep some of your cash value. - Can I restart my IUL if it ends?
It’s possible, but if your health has changed you may not qualify for a new policy or it could be much more expensive. - How do I know how much I should pay into my IUL?
Always check your planned premium and minimum required payment with your agent or insurance company to make sure you’re staying on track.
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