- To protect incomes and pay for mortgages for beneficiaries if die prematurely
- As an empty nester with the need to pay some college expenses
- As a retiree with the need of supplementary funds so one doesn't outlive his or her retirement savings
Term life is the best solution for need #1.
A Holistic View of What a Life Insurance Policy Can Do
An IUL with a lifetime income rider provides the flexibility to address all of a person's changing financial needs at various stages of life.
When a person's children are independent and mortgage is paid, the need for death benefit is no longer as prominent. If he purchases an IUL policy it can adapt to meet the financial needs of he and his spouse as their circumstances and priorities change. For example, if he finds himself wanting to withdraw money as a policy loan to pay for a vacation or help his children with college expenses, his IUL has the flexibility to accommodate those needs.
And with a lifetime income rider on the IUL, he can use the policy to supplement his retirement savings with a guaranteed income he can't outlive. The rider is built into the policy, and you don't pay for it unless you use it.
How Lifetime Income Riders Work
The lifetime income rider is built into the life insurance chassis. If the policyholder activates the rider and begins to take an income stream, the carrier will base its payout on the policyholder's age and current account value. After the income payment is calculated there is a rider activation charge deducted from the policy's account value. The charge does not affect the income payment amount, as it is applied after the income calculation is made.
The income is treated as tax-free since it is under the chassis of the life insurance policy. The insurance carrier will also guarantee a minimum death benefit and minimum account value for the life of the policyholder.
The conditions to Meet
In order to activate the lifetime income rider, insurers typically require: the insured age between 50 and 85, the insured not receiving benefits from other policy riders, and the policy has been issued at least 10 years.