What is adjustable life insurance and how does it work?
When you’re looking for a life insurance policy, it can be hard to choose between the lifelong coverage and cash value of permanent life insurance and the lower premiums of term life insurance.
Adjustable life insurance is a form of permanent life insurance that lets you adjust your premiums, death benefit, and coverage period. It offers the benefits of a permanent insurance policy while accommodating budget fluctuations.
Adjustable life insurance combines the benefits of term and whole life policies
How can you adjust your premiums with an adjustable policy
Your adjustable life insurance policy has a cash value that grows as you pay premiums. Your policy’s cash value also earns interest.
If you need to lower your premiums to accommodate your budget, one option is to use your policy’s cash value toward your premiums. Or, some adjustable life policyholders can choose to pay higher premiums to increase their policy’s cash value, subject to certain limits.
Changing your policy’s death benefit is another way to adjust your premiums. With an adjustable life insurance policy, you can increase or decrease your death benefit as your needs change. For example, if your children become self-sufficient sooner than you expected, you might want to decrease your death benefit to lower your premium.
You may also be able to increase your policy’s death benefit if you need to, but you would have to pay higher premiums, and you might need to pass a medical exam or go through other underwriting processes.
Insurers of adjustable policies may have limits on how often you can adjust your policy or how much you can adjust your premiums, benefits, or cash value contributions, so be sure to speak with an advisor to understand the conditions of your adjustments.
Pros & cons of adjustable life insurance
Advantages of Adjustable Life Insurance
Flexibility: Unlike whole life or term life insurance, adjustable life insurance lets you change your death benefit and premiums as your needs and budget changes.
Lifelong coverage: Adjustable life insurance doesn’t end after a designated term, so you don’t have to guess how long you’ll need coverage.
Builds cash value: Unlike term life insurance, adjustable life insurance lets you build cash value that you can withdraw for any purpose during your lifetime.
Cash value interest can increase: While whole life insurance has a fixed rate of interest on its cash value, adjustable life insurance can earn higher interest when your insurer’s investment portfolio does well.
Disadvantages of Adjustable Life Insurance
More expensive: Term life insurance doesn’t include the benefits of adjustable life insurance, but it’s more affordable for the same death benefit. If you want permanent insurance but don’t need the flexibility of adjustable life insurance, you can save on premiums by choosing whole life insurance.
More complicated: If you don’t want to periodically review your life insurance choices, you may prefer a policy where the elements remain fixed.
To get the most out of adjustable life insurance, you would need to evaluate your financial needs regularly to decide whether any of the elements of your policy should be changed. Because it is more complex than a whole life or term life policy, an adjustable life insurance policy will often require a consultation with a licensed agent to choose the best policy.
How to find an adjustable life insurance quote with eFinancial
eFinancial can help answer your questions about adjustable life insurance. Adjustable life policies are complex, so it’s helpful to discuss your needs with a licensed insurance agent. Call one of our agents at 888-728-0905 to learn whether an adjustable life policy will meet your needs.