“IUL is an underutilized solution,” says Lincoln National’s Thompson. “While IUL products do not offer lifetime guarantees like UL or VUL, there are IUL solutions on the market that offer affordable extended death benefits along with the ability to capture upside performance.”
Non-Universal Life Alternatives
For other clients, however, traditional term insurance—usually the least expensive option—remains the most appropriate one. “Term is a great deal and the right product for 80% of the people,” says Rybka. “It is important to have the right amount of coverage first, and term insurance allows people to afford the right amount.”
Term is a kind of gateway insurance, a starting point for younger people or others with limited financial means. But it isn’t permanent, and doesn’t build cash value. “Most consumers shop [for] term life insurance with only price in mind, rather than verifying what conversion options may be available to convert to a permanent plan,” notes Steven Schacter, senior vice president at Chappaqua, N.Y.-based Forest Hills Financial Group.
For those who can afford higher premiums, whole life may represent a more dependable solution. It offers lifelong coverage and guaranteed cash value. “Whole life, if structured properly, can be utilized as a wonderful asset class providing guaranteed, tax-deferred cash values that typically equate to a bond portfolio rate of return,” says Schacter.
Still, don’t give up on universal life plans. “Starting today, with increasing interest rates, UL could be a fine part of a life insurance portfolio,” says Baystate Financial’s Daroff. “Buy now and benefit from increasing interest rates.”