Flexible life insurance, adjustable life insurance, variable life insurance… with all the names of life insurance products on the market, it’s difficult to keep up!
So what is flexible life insurance anyway? Is it just a kind of universal life insurance, which Clark strongly recommends against, or what?
Flexible life insurance = universal life insurance?
According to the website FinWeb.com, flexible life insurance products encompass adjustable life, universal life and variable life insurance. The key word related to all of these policies is ‘flexible,’ meaning that though each kind has different elements, they each have flexibility built in, such as flexible premiums, flexible ‘face amounts,’ (the death benefit) and flexible investment objectives. The appeal for these kinds of policies is the accumulation of cash values and the ability to change the coverage amounts and premiums.
But, as documented by an article written by David Lazarus of the Los Angeles Times several years ago, insurance policies with flexible premiums have a risk attached to them that the policyholder may need to pay to keep the policy intact.
Also, if a policy holder fails to pay the premiums on a universal life insurance product, he or she may lose the guarantees associated with the policy.
Matthew Quinlan, in his article on ‘Choosing the right insurance for you and your family,’ writes that variable universal life insurance is often pushed due to the high commissions insurance agents earn from the sale, and cites these policies’ ‘awful track record for consumers.’
He also notes that universal life should only be considered if the individual earns more than $350,000 per year, as it has a tax benefit for people in this tax bracket.
The best kind of life insurance
Even though roughly 100 million Americans do not have life insurance, it’s still an important financial safety net to have in case of the unexpected. The best kind of life insurance to get is level-term life insurance for a 10- to 30-year period, at generally ten times your annual income. The average cost for term life insurance is under $200 a year. And, when choosing your insurance provider, you’ll want to choose an insurer that’s rated A++ or A+ at the very least by AMBest.com.
To see a comparison of each type of life insurance product, including term, whole life, universal life, variable life and variable universal life by the American Institute of CPAs, click here, or check out our guide to term vs. whole life insurance.