An adjustable rate life insurance policy lets the policy holder vary their coverage and premiums based on their current lifestyle and family needs or commitments. It’s possible to change many variables in adjustable rate plans including the “face value” or “total value” of the policy as well as the coverage period or the amount paid each month.
Why would I want to use an adjustable rate insurance policy?
There are some advantages to adjustable rate insurance policies in that for example, if you have a young family which is growing you might want to reduce your premiums for a period of time to be better able to meet your day to day living expenses. Then later on in life you might want to increase the premiums so that you can bring the total value of the policy back up to date and ensure a health return on your investment.
Conversely a person without family might decide that they want to increase their premiums at early stage in the policy for example if they were to receive an unexpected promotion at work, and thus their money could work harder in the initial phase of the policy allowing them to reduce their payments later in life when they do start a family.
What kind of benefits are there under an adjustable rate insurance policy?
Benefits vary from policy to policy and it’s worth checking with your insurance provider exactly what the benefits of your policy are, and to check to see if your level of coverage is sufficient for your needs.
It is possible that your adjustable rate insurance policy will pay out a “death benefit” which is paid to your nominated dependents in the unfortunate circumstance that you should die during the period of coverage. These benefits are usually in the form of a lump sum and/or an annuity depending on the coverage you’ve chosen.
Some adjustable rate insurance policies pay a cash value accumulation at the end of the policy, as they invest part of the premium paid each month and then return this investment (less charges) when the policy expires. In some cases this may also be paid as an annuity over time, for example in the case of a pension scheme, where monthly or weekly payments may be made for the lifetime of the policy holder.