Another level of protection: Survivorship fixed indexed UL

Remember that taking policy loans and withdrawals against a life insurance policy will decrease the available cash value and death benefit and can cause the policy to lapse. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis (premiums paid) will be subject to ordinary income tax.

In addition to current fixed and index allocation options that can help build the cash value of the life insurance policy, a variety of crediting methods that may be available in combination with index allocation options can also offer the potential for a stated rate of indexed interest that is credited if the index performance is flat or experiences any increase from one policy anniversary to the next (including when the indexed interest exceeds that set amount).

For example, one crediting method, annual point-to-point, provides a straightforward approach that can help build cash value from only two points in time. This crediting method can be an attractive feature because even in a low interest rate environment, small index changes can mean indexed interest is still credited to the policy.

Financial professionals should also be aware of optional riders (available at an additional cost) that may be available on some FIUL products. FIUL policies may offer riders that can help protect the purchasing power of the loan amounts and can also address concerns about future tax increases. All guarantees in the policies are backed by the financial strength and claims-paying ability of the issuing company.

Added Flexibility through Survivorship

So why consider a survivorship FIUL policy as a potential solution for your clients? It all depends on their financial situation, but for individuals who need to protect two lives, a survivorship policy can be an effective solution.

First and foremost, because the mortality risk is based on two insured, it can be more cost-effective than purchasing two individual policies. The death benefit proceeds paid to beneficiaries are also generally income-tax-free. If structured properly, utilizing survivorship FIUL can be an effective estate planning too that can help cover potential estate tax liability for beneficiaries.

Although the death benefit comes after the passing of the second person insured, it may come at the time when financial proceeds are likely to be most needed. Also, clients may have the option to add a death benefit that would be paid after the first insured dies through an optional rider generally available at an additional cost.

These options can be very comforting for clients, providing them with the knowledge that their loved ones will be able to meet a variety of financial needs, including income replacement for beneficiaries, supplemental college funding, mortgage responsibilities, estate tax coverage and final expenses.