How It Works
Premium Payments
Premium payments are directed to the investment options selected (or the Fixed Account) and are used to create the policy's cash surrender value. Part of the cash surrender value is used to pay for policy expenses, such as the cost of insurance and any riders. After the first premium payment, additional premiums can be increased, decreased or even skipped, within certain limits. By overfunding the policy (or increasing each premium payment) the most can be made of the policy's tax deferral and the potential to access more money tax-free later on. Keep in mind, if the policy is funded in excess of certain IRS limits, it may lose many of its tax advantages. It is possible that coverage may not continue to maturity date if the policy costs reach maximum guaranteed levels and premiums continue to be paid at the initial planned premium level.
There is the flexibility to not make premium payments provided the account value is sufficient to cover current monthly charges; however, not paying premiums can result in reduced account values and increases the risk that the policy could lapse.
Death Benefit
The death benefit replaces income that would be lost upon the insured's death and helps ensure the survivors have the money they need to meet their immediate and future income needs. It readily provides funds to the family for personal or business needs, usually without the delays and expense of probate. As long as the policy is properly structured, the death benefit is usually paid income tax free to the beneficiary. However, the death benefit may be subject to estate taxes depending on the size of the estate, the beneficiary, and the ownership arrangement within the policy.
Investment
Premium dollars can be directed into a broad range of low-, medium-, and high-risk investment options advised by well-known fund managers, in addition to a guaranteed interest option (guaranteed by the claims-paying ability of Ameritas Life Insurance Corp.). Enjoy the diversity of a variety of fund managers - all within the convenience of one product. The Investment Option area of this website provides detailed information about the subaccounts available and Ameritas offers a free asset allocation tool, the Morningstar Asset Allocator from Morningstar Associates, LLC, to help you build a mix of investments to match the personal goals and risk tolerance of your client.
Don't forget the tax advantages of investing within a variable life insurance policy. Cash values can be transferred among the various investment options (even between fund families) with no current tax consequences. Any investment growth is tax-deferred, which means the money has the potential to grow faster than it would in a taxable investment. Gains that would have been lost to taxes each year remain in the policy to generate even more earnings.
Access to Policy Values
While variable life insurance should be treated as a long-term financial tool, withdrawals or loans are available from the policy's account value that can be used to fund large purchases or unexpected expenses. Withdrawals from the value of the policy up to the total amount of premiums that have been paid can be made without paying income taxes. These withdrawals are tax-free because they are considered a return of the cost basis. Assuming the account value is greater than the cost basis, once the cost basis has been withdrawn, you may want to consider recommending a policy loan, which allows tax-free access to the remaining account value in the policy. Both loans and withdrawals will reduce the policy's cash surrender value and death benefit and excessive loans or withdrawals may cause the policy to lapse. Remember, the full tax advantages of the policy remain intact only if the policy is kept in force for the insured's lifetime.
The Ameritas Advisor VUL insurance policy (Form 4051) is issued by Ameritas Life Insurance Corp. and underwritten by affiliate Ameritas Investment Corp. Variable products have investment risk, including the possible loss of principal. Before investing, carefully consider the investment objectives, risks, charges, expenses and other important information about the policy issuer and underlying investment options. This information can be found in the policy and investment option prospectuses, which are available on this web site. Please read the prospectus carefully before investing or sending any money. It is possible that coverage may lapse if policy costs reach maximum guaranteed levels, and premiums continue to be paid at the initial planned premium level.
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