Get Free Home Insurance Quotes Quickly & Easy

If a funding premium is calculated to reasonably sustain the policy to age 100, the question might arise "is there any reason to pay more than that premium?" And while some agents will attempt to suggest one policy is better than another solely on the basis of which one is illustrating the lower premium, it is evident how disastrous it can be in the long run to buy a policy based on price when it had no "price" to begin with. The policy owner accepts this quid pro quo when buying a policy that allows enormous flexibility in its funding. As discussed in earlier posts, it is the policy owner's responsibility to determine and manage the amount of the premium for a flexible premium (Universal Life or Variable Universal Life) policy under changing economic conditions. The preceding example and the accompanying tables highlight the importance of resisting the purchase of buying a Variable Universal Life policy based on its illustrated "premium." While this represents a dramatic 50 percent increase in annual funding for this policy, not only does she better assure herself that the policy will sustain no matter how long she lives, but the underlying statistical analysis suggests that the policy death benefit at age 100 - should she survive to that age - could exceed $14 million. Continuing the example of the 45-year-old female seeking $1 million of lifetime coverage, we can recalculate the funding premium according to her risk tolerance and willingness to stipulate a probability of success with which she is comfortable. An insurance company's monthly process for administering Variable Universal Life policies includes calculating the average net amount at risk charges for the prior month. Tables 14.2 and 14.3 demonstrate the different level of charges - and summarizes the benefits - of paying $12,000 per year for a policy that might have been "ok" at $6,000 per year. This is because the higher funding premium will - all things being equal - create cash value faster, thereby more quickly diminishing net amount at risk. The answer is perhaps counter-intuitive: If there are sufficient resources to pay more premium than necessary, not only does the higher funding premium give the policy a more comfortable confidence that it will sustain to age 100, but the total policy Cost of Insurance charges will be less.