How should I consider Universal Life interest bonuses?

Several companies offer bonus interest that are often payable after the policy has been in force for a few years. The amount of interest, when and under what condition it's paid vary widely. There are some companies that don't offer any bonuses whatsoever.

 

There is no direct answer as to what policy structure works best. In fact, as mentioned earlier in this article, there is no "one-size-fits-all" policy. Different structures will work best depending on many factors, such as:

• The amount of insurance purchased.
• How much are you willing to over fund your policy (put more money into the policy than the minimum required)?
• Are your financial goals short term or long term? How short or how long?
• How aggressive is your investment style?
• Is the money you contribute money that you absolutely don't need for several years to come, or would you need access to it at any time?

It soon becomes evident that certain conditions, risks, and trade-offs yield significantly different results. Hence the precise reason an experienced security advisor must work with you to determine the product that will best satisfy your needs. Give us a try today!

 

Bonus interest is generally calculated either as a percentage enhancement to the actual performance of the investment account, or an explicit amount added to the fund value.

 

Beware, some companies will actually charge a higher administration fee in order to offer higher bonuses. Ensure these fees are deducted from the median interest assumption discussed in the previous section.

 

Understanding bonus interest for the particular product being considered, when it will be paid, conditions under which it may not be paid, what impact the bonus interest has on policy values, and the impact of variable investment performance on the bonus interest payment will help you understand its true value.

 

Finally, remember, it is called a "bonus" interest. Consider it as icing on the cake, and not as something that is guaranteed, unless it is explicitly expressed in the policy contract.

 

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What are reasonable interest assumptions for Whole Life plans?

 

 

 

Click a link below to jump to another section of the article:

 

What is the purpose of life insurance illustrations?

 

What is a reasonable period of time an illustration should consider?

 

How does the interest rate chosen make a significant difference in investment returns?

 

What are reasonable interest assumptions for Universal Life plans?

 

Summary of life insurance traps to avoid.

 

Contact a professional broker for your free consultation.

 

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