What is Indeterminate Premium Life Insurance?
A whole life policy (or a permanent life insurance policy) has different types of premium, and an indeterminate premium is one of them. The indeterminate premium will most probably vary from year to year. Its distinguishable characteristic is that this type of insurance has a provision for adjustable premiums. The premium changes depending on mortality, investment earnings and company expenses. It’s possible that your premium can go down, but it will never go over a pre-determined amount.
When purchasing this type of whole life policy, the premiums are lower compared to most other whole life policies. This amount will increase annually after the year that you purchased the policy. The pre-determined amount is designated, and this will be the maximum amount the insurance company is allowed charge you. The insurance company will make adjustments to the premiums as needed. Different companies have their own ways of charging policies, so before you decide on purchasing a policy, make sure you understand the terms.
The indeterminate premium payments will include the cash value amount and the face value. Your policy’s face value is the money your beneficiary will receive when you pass on, and the cash value is your own investment account.
Why should I get this type of insurance?
Indeterminate premium life insurance has many advantages:
• Premiums are lower than other types of whole life coverage – because of this, you can buy more affordable insurance. For an individual who is confident that his or her salary will increase over time or that payment will decrease, then this option would be a huge plus.
• It’s quite easy to budget with an indeterminate premium life insurance plan – premiums only change annually. Also, you are sure that the premium will not go over the designated maximum amount agreed that your insurer gave you when you purchased the policy.
• Lower premiums are possible – this can happen when your insurer’s expenses go down, investment earnings are better or that mortality is different than initially anticipated. Basically, you pay less for just the same amount of benefits.
• Payments are fair – the insurance company will use their tables to show you what rate is the right one for you. These tables are based on mathematical formulas. You can be sure that you are not being made to pay more for what you are getting.
Comparing indeterminate and fixed rate payments
If you prefer to have a monthly fixed-rate payment, then an indeterminate plan may not be the one for you. Fixed-rate premiums can guarantee you the same rates as the quotes that the insurance company will provide you from the very start. Until the day you pass on, the amount you will need to pay will be the same. Of course, this also means that while your payment won’t increase, there’s also no chance for it to decrease.
Compare several policies first. Choose the best type of policy that you will need. No matter on what kind of premium payment you decide on, your family should get the money they deserve. It is best to decide on your policy first, and then decide on the best option of premium payments. Remember, consult with your insurance agent first, and make the right choice.