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Maybe you’ve thought about getting life insurance to protect your family in case something happens to you. But you haven’t gotten around to it because — let’s face it — figuring out what kind of policy you really need is complicated and a little intimidating.
When you shop for life insurance, you get bombarded with weird jargon like “term life,” “cash value,” “universal life,” “death benefit,” “whole life,” “annual renewable term,” and on and on and on. It’s enough to make you shake your head and walk away.
What if there was someplace that would walk you through it and make it a lot easier?
That’s the idea behind Amplify, a digital-first life insurance platform that simplifies and streamlines the entire life insurance purchasing process. Their website spells out what your options are and how much each option may cost. Then, if needed, actual licensed agents can guide you throughout the process.
For a long time, the life insurance industry has been dominated by a complicated, opaque, commission-driven system that sells you the products they want to sell you.
But in today’s world, you can shop online for all kinds of things and decide exactly what you want to buy, whether you’re looking at new shoes or a phone or a car. Why shouldn’t it be the same for life insurance?
Here’s another wrinkle: Amplify not only gives you traditional life insurance choices, but it also gives you access to indexed universal life insurance — a specific kind of policy that’s usually only easily accessible to the wealthy. The affluent and the well-heeled have been using this kind of policy to build tax-efficient wealth, while still protecting their families.
Amplify wants to democratize insurance and show everyone how to take advantage of it. And it’s especially useful if you’re worried about volatility in the stock market.
Which Type of Insurance Is For You?
Here are the few main kinds of life insurance you can choose from:
1. Term Life Insurance
Term life insurance is exactly what it sounds like. You’re buying life insurance for a specific “term” or period of time — typically 10, 15, 20 or 30 years. Then the policy typically expires.
This is the simplest, cheapest and most common kind of life insurance policy. The earlier in life you get one of these policies, the lower the premiums will be.
2. Whole Life Insurance
Whole life insurance is actually pretty intuitive. The policy lasts for your whole entire life — as long as you keep paying your insurance premiums.
This type of policy usually costs a lot more than term life, because your policy lasts a lifetime. No matter when you pass on, your loved ones are guaranteed to get a payout, also called a “death benefit.” Basically, you’re paying extra for permanent financial protection for them.
3. Universal Life Insurance
Amplify offers this more flexible kind of permanent insurance. Like whole life insurance, it doesn’t expire, and it has a death benefit that covers your whole lifetime. It’s a life insurance policy that provides typical protection with additional tax advantages.
It has a built-in cash value that you can borrow against. As you build cash value, you can use that money to pay your premiums, diversify retirement income or fund college expenses. It’s even possible to build enough cash value to pay all the premiums, eliminating out-of-pocket expenses for life insurance coverage.
Unlike term life and whole life policies, which require you to pay your premiums every time they’re due, universal life policies give you flexible premiums, as you have sufficient cash value in your policy. Amplify offers two varieties of universal life insurance: indexed universal life insurance and variable universal life insurance:
Indexed Universal Life Insurance
Amplify gives you access to what’s called an indexed universal life insurance policy or IUL for short. Yes, that’s a mouthful.
This insurance policy may be linked to market indices like the S&P 500, Dow Jones or Nasdaq. If the market the policy is linked to performs well, the policy’s cash value increases up to a certain cap, such as 7%.
Here’s the really cool part: If the stock market falls, your returns are lower, but there’s a minimum, or floor, so you don’t lose money. So if the floor rate is 1% and the market drops 9%, you’ll still earn 1%.
With many policies, your gains reset annually, so the increase in cash value is protected from future downturns.
And protection from stock market downturns is a really nice feature to have in a time when lots of us are worried about the stock market’s volatility.
Variable Universal Life Insurance
The second variety of universal life insurance is known as variable universal life insurance or VUL for short. This type of policy offers even more flexibility than the IUL by giving you the opportunity to choose where your premiums go. In fact, you can place up to 90% of your premiums in investment funds such as the S&P 500, REITs, global funds, and even alternative assets.
The best part? Growth in your cash-value can be taken out as tax-deferred gains while you’re still alive and your family will still receive a death benefit when you pass. Similar to IUL, this type of policy is something the wealthy have used as a tax avoidance strategy for their high-growth investments. The upside/downside to this policy is that the potential for growth is unlimited and tied to market conditions so there’s no ceiling, but there’s also no protection if there’s a market downturn.
So if you’re going to invest anyways, why not invest in a life insurance policy that can provide tax-efficient wealth growth and protection for your family.
How to Protect Your Family Like Rich People Do
Once you go to Amplify’s website, you’ll fill out some basic information and get some estimates for policies. Like all life insurance policies, the cost is affected by a number of factors, including your age and health, and whether you’re a smoker.
Once you choose an insurance product, you’ll continue the application process.* If you’re getting permanent life insurance, then at some point you’ll talk to one of Amplify’s advisors. Most of the process is digital, though.
In general, life insurance protects the financial security of a loved one when you die. If someone depends on your income and would be negatively impacted financially if you died unexpectedly, you should have some type of life insurance.
People buy universal life policies for a variety of reasons, including:
- They want lifelong death benefit protection
- They’re looking for tax-advantaged savings growth
- They’re looking for protection against market volatility
- They want more flexibility and cheaper premiums than whole life insurance
The premiums for universal life are typically higher than term life insurance policies that have a set time limit for coverage, but lower than for whole life policies with lifetime coverage. So universal life is a balanced option — a bit more expensive than term coverage, but a cost efficient way to build wealth and get permanent protection.
It only takes a few minutes to get a quote and see what your options are.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.
Variable Universal Life policies are a combination of life insurance and a security that requires Securities and Exchange Commission registration. Securities are offered through The Leaders Group, Inc. Member FINRA/SIPC 26 W Dry Creek Circle, Suite 800, Littleton, CO 80210, 303-797-9080. Amplify Life Insurance Company is not affiliated with The Leaders Group.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.