Provider Reviews: Principal Life Insurance

Physicians whose family depend on their income need to ensure their families are taken care of even if the worst happens. A Principal Life Insurance policy can provide death benefits for loved ones should a physician unexpectedly pass away. Policies can be used for other purposes as well.

Principal Life Insurance Company underwrites a few types of life insurance policies. Read on to find out the distinctives of Principal’s policies, and whether one might be right for you.

Who is Principal Life Insurance Company?

Principal Life Insurance Company is part of Principal Financial Group, a multifaceted financial and insurance services conglomerate based in Des Moines, Iowa.

Principal Financial Group provides investment, retirement planning and insurance services. The insurance services primarily include life insurance, disability insurance, dental insurance and vision insurance. The financial services include assistance with 401(k)s, Roth and traditional IRAs, annuities, and other retirement savings plans.

Principal Life Insurance Company is the division that specifically focuses on life insurance policies. The company provides both term and permanent life insurance policies, and has several intriguing non-term policies that combine the Principal Financial Group’s investing and insurance expertise.

The Principal Financial Group was founded more than 140 years ago, in 1879, and operates in all six inhabited continents today. More than 33 million people trust Principal with their investment and insurance needs, and the group has more than $700 billion in client assets under management.

Many of those customers are high-net-worth individuals and high-income earners. A large portion of the customer base has needs similar to those of physicians (and plenty of customers are physicians).

The reputation of Principal Financial Group doesn’t just stem from its large and largely satisfied customer base. The group maintains an A+ rating with A.M. Best, A1 Good rating with Moody’s Investor Services, A+ Strong rating with the S&P Global index, and an A+ rating with the Better Business Bureau. The group’s financial stability is impeccable, and its customer service is generally excellent.

What Types of Life Insurance Does Principal Life Insurance Company Offer?

Principal Life Insurance offers both term life insurance policies and permanent life insurance policies:

• Term policies only include death benefits, and remain in effect for a defined term.
• Permanent life insurance policies are designed to remain in effect for the entirety of a policyholder’s life, and they have both death benefits and a savings component.

For more details on these types of policies and life insurance in general, check our Complete Guide to Life Insurance. We can also help you compare quotes for life insurance policies from Principal and other companies.

Term Life Insurance Policies

Term life insurance is the most basic form of life insurance, only providing death benefits for a defined period of time. The benefits will be paid as a lump sum should you pass away while the policy is in effect (during its term). These policies tend to have the lowest premiums, because they’re only in effect for a defined time.

This can be a good way to ensure your immediate family members are financially stable if you pass away. Consider a term policy if you need additional coverage after increasing your income, or if you have excellent retirement savings options through your employer or private practice.

Principal Term Life Insurance Policies

Principal has term life insurance policies with 10-, 15-, 20- and 30-year terms. Coverage can be as low as $200,000, but most physicians choose coverage amounts in the millions. Anyone between 20 and 80 years old can purchase a term policy.

Notably, all of Principal’s term policies can be converted to permanent policies should you wish to change the policy type at some future date. Full-term conversion is available if you want to change the entire policy to a permanent one, or partial-term conversion can be used to separate coverage into a smaller term policy and a smaller permanent policy (two separate policies).

You might purchase a Principal term life insurance policy when you begin residency, complete residency, start a family, grow a family, or need additional coverage for some other reason.

One-Year Term Life Insurance Policies

Principal also offers one-year term life insurance policies (OYT policies). These short-term policies are structured much like a standard term policy, except they provide 12 months of coverage rather than a decade plus. The policies can range from $200,000 to $5 million, and can be purchased between ages 20 and 99.

You might purchase a Principal only-year term policy if you’re taking out a large short-term loan. For example, you may want this coverage if using a home equity line of credit (HELOC) to make extensive home renovations. You may also need an OYT policy if you use a short-term business loan to begin a private practice. Outside of applications like these, one-year life insurance is seldom needed.

Universal Life Insurance Policies

Another form of permanent life insurance is Universal life insurance. Universal policies are intended to provide coverage throughout your entire life (up to age 121 for Principal policies), and also have some type of long-term savings component.

This can be a good way to ensure your family is financially cared for, and that you’re financially ready for retirement. Consider a policy as soon as you begin earning or grow income, as the policy’s savings will grow immense over time thanks to compound interest.

Principal Universal Life Insurance Policies

Principal’s Universal Life Insurance Policies contain the death benefits and long-term savings as described above. The policy’s savings feature is structured as cash value that accumulates at a guaranteed interest rate, regardless of how markets perform.

You can retain the policy until death, or you can access the cash value early. The cash value can be accessed through a loan against the policy, full surrender, or partial surrender. To surrender a universal policy essentially means you forfeit the surrendered portion of the policy, and receive a lump sum payment that’s the surrendered portion’s “cash value.”

Should you want to grow the cash value faster than the policy’s standard growth rate would, you can make additional contributions through flexible premiums. Flexible premiums allow policyholders to pay more than the minimum premium, and contribute the excess toward the cash value so that it grows at the guaranteed rate.

Coverage amounts for Principal’s universal policies typically max out at $1 million, but physicians can often secure higher coverage by proving their income. In the unlikely event that you can’t get enough coverage, multiple life insurance policies (including different types) can be purchased.

You might use a Principal universal life insurance policy as a means of having some guaranteed savings even if other financial planning goes awry. This might form a base for your retirement savings plan.

Indexed Universal Life Insurance

Principal structures their indexed universal life insurance much like the standard universal life insurance policy described above. The death benefits are functionally identical. The primary difference lies in how the savings accumulates.

Rather than providing a guaranteed growth rate, Principal’s indexed universal life insurance policies peg the cash value’s growth to a market index (often the S&P 500). The cash value will grow at a rate corresponding to how the market performs. During down years, Principal has a guaranteed minimum baseline rate of 0% — so you won’t lose money even if the market crashes.

Principal offers universal life policies with fixed or flexible premiums. The flexible premiums allow for additional contributions. The fixed premiums have a structured premium schedule that the policy holder must follow.

You might opt for a Principal indexed universal life insurance policy if you want to increase rate of return based on the stock market’s long-term upward trend.

Variable Universal Life Insurance

Principal variable universal life insurance is structured much like the indexed (and standard) universal life insurance policies. The death benefits are again identical, and the difference again lies in how the savings accumulates.

Rather than pegging the cash value growth to a market index, the variable universal life policies allow for more flexibility as to what equities the policy’s savings are invested in. You can choose from target-risk or target-date investment funds that Principal manages.

The variable policies don’t come with the same 0% baseline guarantee, but they offer more investment customization. The funds are generally well managed, because they are managed by Principal Financial Group’s financial professionals.

You might choose a Principal variable life insurance policy if you want more control over your long-term investments.

What About Whole Life Insurance?

Principal Life Insurance Company doesn’t have whole life insurance policies. Whole life insurance is another form of permanent life insurance, but it usually comes with fewer choices and stricter investment options than universal life. Principal instead only offers permanent universal life policies, largely because the broader Principal Financial Group has extensive investing expertise.

A universal life policy will functionally perform much like a whole life policy would, and there’s likely not a need to seek out a specifically whole life policy given Principal’s expertise.

Principal Monthly Premiums

As is true with any life insurance company, the premiums that Principal charges are based on many different factors:

• Type of Policy: Term policies cost less than universal policies, because term policies don’t provide coverage indefinitely (or until age 121). Within a term policy, longer terms cost more than shorter ones.
• Coverage Amount: Purchasing more coverage inherently increase premiums, but you shouldn’t base coverage on premium. Instead, select the coverage amount based on your income and financial needs.
• Optional Riders: Principal has several optional riders, some of which may add significant value for you. Adding riders increases cost.
• Age and Health Conditions: Your age, general health, and specific health conditions will impact premiums. Younger and healthier people pay the lowest premiums, so you may want to purchase coverage early on in your career.

Life Insurance premiums with Principal are in line with the industry averages.

Principal Life Insurance Optional Riders

There are several life insurance riders with Principal that can be useful, depending on your situation and needs:

• Accelerate Benefits: Accelerated benefits allow the policyholder (and only the policyholder) to draw on their policy if they’re diagnosed with a terminal illness. Policy holders can use benefitsfor medical or personal expenses. The lesser of 75% of the policy’s cash value or $1 million can be withdrawn.
• Chronic Illness Death Benefit Rider: The chronic illness rider is much like the accelerated benefits rider. The policyholder draws against their death benefits rather than their cash value, however, and can withdraw up to $2 million.
• Waiver of Premium: Should the policyholder become disabled for 6+ months, the policy waives all future premiums. The rider remains in effect until age 65, or until age 95 if the policy holder is already utilizing it.
• Cost of Living Increase: Cost of living coverage allows the policyholder to increase their coverage every three years, until age 55. This can be an affordable way to secure more coverage later in life (e.g. when kids are in college).
• Children Term Insurance Rider: A small death benefit of $5,000 to $25,000 can be procured for each child. Most policy holders uset this to cover funeral expenses, but physicians generally can pay for funeral expenses out of their savings/income. Few physicians need this rider.
• Conversion Extension Rider: A conversion extension rider is only available on term life insurance policies. It provides a longer window, up until age 70, to convert a term policy into a universal one. You can convert term policies sooner without purchasing the rider.

What Do Beneficiaries Need to Collect Death Benefits?

Named beneficiaries need a copy of the original insurance policy, and a copy of our death certificate. They can then submit a claim for the policy’s death benefits. This is a standard process throughout the industry.

Is Principal Life Insurance Good for Physicians?

Principal Life Insurance is a generally good choice for physicians needing universal life insurance. The Principal Financial Group’s investment expertise is especially helpful if taking advantage of the variable universal policy’s fund options. Another strong choice is the indexed universal policy. Both can grow a physician’s salary into a substantial nest egg.

Physicians who want term life insurance will find Principal’s premiums competitive, and the company’s customer service is top-notch.

Principal also has group life insurance policies for physicians who own private practices. The company’s excellent customer service also makes it a time-saving choice for medical practices. Physicians can spend less time dealing with insurance and more time rendering care of patients.

Protect Your Income Now

Don’t overlook your own needs while planning for the future. It’s important to secure your income with disability insurance. Statistics show that 1 in 4 20-year-olds will face a disability that keeps them out of work for at least a year before retirement. Without disability insurance, you risk losing your income or having to take a lower paying job. For help with contract review, financial planning, and insurance options, reach out to Physicians Thrive.

For more information on contract review, financial planning, disability or life insurance, contact Physicians Thrive now.

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