Fixed Premium Life Insurance: What It Is And What You Should Know

Many people shy away from getting a life insurance policy simply because they fear the cost may skyrocket at any given time.

Many policies allow the price to go up for many reasons. This includes health changes, risky hobbies, or even changes in the market.

However, there is an option called fixed premium life insurance, and in this article, we will discuss what it is and why you should consider it.

What is Fixed Premium Life Insurance?

Fixed premium life insurance policies are policies where the premium doesn’t change at all throughout the whole duration of the policy. However, fixed premium life insurance isn’t just one type of insurance.

There are a couple of different types of life insurance policies that offer fixed premiums. Let’s go over what they are.

Traditional Whole Life Insurance

Traditional whole life insurance keeps your premium payments and death benefits the same for your entire life. This policy builds up a cash value that remains yours while you’re alive.

There are two flavors of whole life:

Non-Participating

This type guarantees coverage with fixed-level premiums. The insurance company does not pay any dividends back to you. Your premium amount stays the same every year.

Participating

This also provides guaranteed death benefits and set premiums for life. The difference is it pays dividends earned from the insurance company’s investments. You can use these dividends either to lower your premium cost or increase your policy’s death benefit.

The key difference comes down to the dividends. Non-participating policies do not return any earnings to you. However, participating policies give you dividends that provide options to improve costs or coverage.

Universal Life Insurance: Excess Interest Whole Life

Universal life insurance offers flexible premiums and adjustable coverage. There are many types, including something called Excess Interest Whole Life.

Here’s an easy breakdown:

  • It requires you to pay fixed whole life insurance premiums on time, just like with traditional policies.
  • These set premiums ensure a guaranteed minimum death benefit.
  • The insurance company invests your premium dollars. If those investments outperform expectations, the “excess interest” gets credited to your policy’s cash value.
  • So, unlike basic universal life, this version can give you increasing cash value if the insurer’s investments do well.

The fundamental advantage is the excess interest gives you the possibility to accrue more savings you can access while alive. This improves the policy’s long-term value.

Term Life Insurance

Next up is Term Life Insurance. This type can allow you to choose different term lengths for your life insurance (10,20 or 30 years). It’s generally considered the most affordable type of life insurance.

For Term policies, you’re also able to get a fixed premium and pay the same rate throughout your policy’s term. This can make it easier to budget for.

One downside is that once the term ends, so does the coverage. If you still want life insurance, you’ll need to apply for a new policy at an older age – assuming your health hasn’t changed much by then.

Guaranteed Universal Life Insurance

The last, and probably the main type of insurance policy that’s used for fixed premiums, is Guaranteed Universal Life Insurance. As the name suggests, a GUL policy guarantees that your premiums will stay the same as long as you pay them on time.

This type of insurance is best for people who want affordable premiums while having permanent coverage.

Why Is Guaranteed Universal Life The Most Used Fix Premium Option?

Guaranteed Universal Life (GUL) insurance is a popular choice for fixed premium policies. There are a few big reasons why:

  1. Lifelong Coverage – GUL premiums lock in a guaranteed death benefit that never expires, covering you for life.
  2. Stable Rates – Your premium payments stay the same every year, allowing you to accurately budget long-term.
  3. No Lapse Guarantee – Even if the cash value falls, your core death benefit cannot lapse or be canceled as long as payments are made.

What Are The Pros and Cons Of a Fixed Premium Life Insurance Policy?

If you’re considering getting a policy with fixed rates, it’s only right that we go over the pros and cons of such policies. Let’s start with the benefits:

Pros Of Fixed Premium Life Insurance Policies

Predictable Premiums

You can always count on that premium being exactly the same which makes it extremely easy to budget for. This is especially helpful for those on a fixed income.

Cash Value Growth (Some)

Some fixed-rate policies accumulate cash value over time.

Flexibility

While the premiums stay the same throughout the life of the policy, there is some flexibility in terms of customizing your death benefit and other features.

Cons Of Fixed Premium Life Insurance Policies

Can Be More Expensive

Depending on the insurance company you use, fixed premium policies can be more expensive compared to term life due to the fact that they offer permanent coverage and cash value accumulation.

Can Be More Complex

These policies combine permanent coverage with investment components which add complexity. You need to monitor cash value growth, loans, and other moving parts. For some people, adjustable policies with flexible premiums work better for their situation.

Slower Cash Value Growth

While we listed that this was a benefit, compared to other life insurance policies, the cash value growth in fixed premium policies can be significantly slower.

Who Is a Fixed Premium Life Insurance Policy Best For?

Fixed Premium life insurance policies could be good for a couple of different types of individuals:

Those With Fixed Incomes

As mentioned before, if you’re living on a fixed income or have limited funds to work with when it comes to insurance premiums, then these policies are tailor-made for your situation.

Families Who Want Permanent Coverage

If you’re a family looking for permanent life insurance coverage that won’t lapse and will also offer some type of investment vehicle, then a fixed premium policy could be the right choice for you.

Those Looking to Build Cash Value

For individuals who want to build cash value over time with their life insurance, a fixed premium policy may be beneficial since it allows for tax-deferred growth on your cash value account.

Estate Planning

Fixed policies provide guaranteed payouts to your beneficiaries and can play a major role in estate planning.

How To Choose The Best Option For You

So, how exactly can you choose the best type of life insurance policy for your needs? Here are a few steps to help you make an informed decision:

Evaluate Your Coverage Needs

The first step is to evaluate what you need coverage for. If you fall under the scope of being someone who needs to cover kids for a lifetime, a fixed premium policy may be the best choice.

Consider Your Budget and Financial Goals

You also want to consider your budget and financial goals. Do you want a policy that will provide cash value growth over time? If so, a fixed premium policy may suit your needs. But if you’re looking for more comprehensive investment options and are willing to take on more risk, a variable life insurance policy could be a better fit.

Conduct Company Research

Next up is company research. You need to dive deep into the companies you get pricing from. You need to look at their reviews, financial strength ratings, and more.

Consider Dealing With a Specialist: Liberty Financial Group

Finding the right life insurance is extremely important. This decision shouldn’t be made by just talking to just a few insurance companies.

At Liberty Financial Group, we take the legwork off your plate. Our dedicated specialists handle the heavy research and analysis, so you don’t have to.

We do this by working with 50 top-rated carriers so we can explore a wide variety of policies to fit your budget and goals. Instead of a single limited option, view multiple quotes side-by-side to make an informed decision.

Our focus is on educating and empowering you to feel 100% confident in choosing the tailored coverage you need.

If you’re interested in getting a quote from us, visit Liberty Financial Group’s website to share your details. Or feel free to call 888-414-3873 with any questions.