Adjustable Life Insurance
Adjustable life insurance is a hybrid of term life insurance and whole life insurance that allows policyholders to choose to adjust policy characteristics, including the policy period, face value, premium, and the length of the premium payment period.
Adjustable life insurance policies also contain an interest-bearing savings component called a “cash value” account.
Understanding Adjustable Life Insurance
Adjustable Life Insurance Other life insurance products do not require cancellation or purchase of additional insurance policies due to changes in the circumstances of the insured. It is attractive to those who want the protection and cash value benefits of permanent life insurance, however, we need or want a certain level of flexibility in terms of policy features.
By using the ability to modify premium payments and par amounts, policyholders can customize their coverage as their lives change. For example, policyholders may wish to increase the face value when they marry and have children. The unemployed may want to reduce their premiums to fit within a limited budget.
- Adjustable life insurance allows policyholders to change policy features to a limited extent without canceling or purchasing additional policies.
- It enables policyholders to reformulate their insurance plans to adapt to life changes.
- There is a savings section, called a “cash value” account, that adjusts for life insurance.
Like other permanent life insurance, adjustable life insurance has a savings component that usually earns cash value interest at a guaranteed rate. Policyholders can make changes to the main features of their policy to a limited extent. They can increase or decrease the premium, increase or decrease the face value, extend or shorten the guarantee period, and extend or shorten the premium payment period.
Adjustments to the policy will change the guaranteed term of the interest rate, and changes to the guaranteed term will change the cash value statement. The paramount is reduced on request or in writing. However, increasing denominations may require additional underwriting, and substantial increases require full payment of Medicare.
Increasing the face value of an adjustable policy may require additional coverage, while large increases may require full medical coverage.
Guide to Life Insurance Policies and Riders
Internal Revenue Code (IRC) Section 7702 Defines characteristics and guidelines for life insurance policies. Subsection C of this section sets out guidelines for premium payments. Policyholders may not adjust premiums in a manner that violates these Guidelines. Increasing the premium may also increase the par value to such an extent that evidence of insurability is required.
However, many life insurance companies set parameters to prevent breaches.
Much like other life insurance policies, adjustable life insurance policies typically feature optionality that riders are familiar with including waived premiums for accidental death and dismemberment of riders;
Adjustable Living Policies provide flexibility that most traditional policies do not. However, the frequency of allowed adjustments is limited within a defined time frame. The application must be made within the stipulated period and by the guidelines set by the insurance company.
Adjusted variability can create a policy that reflects term life insurance or whole life insurance. Effectively, an adjustable life insurance policy allows policyholders to customize their life insurance to meet current or anticipated needs.
As with any permanent policy, research each company considered to make sure they belong; to the best life insurance company; currently running.