Guaranteed
Earning Increase Death Benefit This option will guarantee that your beneficiary will receive the higher of your account's value or the amount of your investment, plus a predetermined annual increase at your death.
You can also switch back and forth from a level death benefit to
an increasing death benefit option.
You can still get an edge over inflation: Look at universal life or whole life policies that have
an increasing death benefit option to give you the edge over inflation.
You can choose a fixed death benefit option or
an increasing death benefit option.
However, in practice,
the increasing death benefit option comes with a lot of risk.
Universal life offers two death benefit options —
an increase death benefit option and a level death benefit option.
On paper,
the increasing death benefit option makes a lot of sense and it looks attractive.
This is because
the increasing death benefit option piles cash value on top of a level death benefit.
If the policy holder chooses
the increasing death benefit option, the pure insurance component will remain the same over time; so as the policy's cash value increases, the death benefit increases.
If you choose
the increasing death benefit option, this amount grows each year.
With
an increasing death benefit option, the net amount of insurance at risk never decreases over time as all cash values are added to the initial face amount to determine the actual death benefit.
The increasing death benefit option on universal life insurance works by building cash value in addition to the death benefit, instead of using the cash value to offset the payment of the death benefit claim.
Increasing — With
the increased death benefit option, the death benefit amount will be equal to a specified amount, plus the accumulation value.
You can choose a fixed death benefit option or
an increasing death benefit option.