Principal Life Insurance Review 2022

Pros Explained

• Multiple permanent coverage options to choose from: Principal offers three categories of permanent coverage choose from: universal life, indexed universal life, and variable universal life.
• Multiple term conversion options: All term life policies provided by Principal allow for term conversion. Options include full-term conversion and partial term conversion in which a portion of the policy is converted while the remainder is kept as term coverage, creating two separate policies. 
• Many riders to choose from: Though not offered on every type of policy or to every issue age, Principal has several life insurance policy riders to choose from. These include an accelerated death benefit, waiver of premium, and a cost of living increase rider.

Cons Explained

• Whole life policies not offered: Principal only offers term and universal life insurance coverage. Whole life policies are not available.

Available Plans

At Principal, you can choose between term life coverage and a variety of different universal life policies. Here’s a look at the options you’ll have.

Term Life

Principal offers term life coverage in 10-, 15-, 20-, and 30-year terms with coverage starting as low as $200,000. Issue ages on term policies range from 20 to 80, depending on the term chosen and whether the applicant is a tobacco user.

Available riders include accelerated benefits, child term, conversion extension, and waiver of premium. All term policies are also given standard policy conversion privileges, allowing policyholders to convert their term coverage to permanent, universal life insurance.

One-Year Term

This provides a face value between $200,000 and $5 million. Principal’s one-year term (OYT) policy offers 12 months of temporary life insurance protection. Issue ages range from 20 to 99, though the policy is non-renewable and there are no rider options available.

Universal Life Flex III (UL Flex III)

Available from ages 0 to 85, Principal’s Universal Life Flex III policy offers flexible long-term protection through age 121. Coverage options start at $25,000 and go up to $1 million or more for some applicants with flexible premiums.

Universal Life Flex III accumulates cash value at a guaranteed interest rate, helping you prepare for the future. It allows for policy loans and partial surrenders and also lets you choose between three different death benefit options. It also permits policyholders to request face amount increases anytime within the first year, or face amount decreases in years two through five.

Indexed Universal Life Accumulation II (IUL Accumulation II)

With face values starting at $50,000, the Principal Indexed Universal Life Accumulation II policy offers permanent coverage for ages 20 to 85. The policy’s value earns interest based on underlying stock market indices, with a baseline rate of 0%. This means your indexed cash value cannot lose money, no matter how poorly the market performs in a given year.

There are three death benefit options (DBOs) to choose from with this policy. DBOs include: 

• Option 1: Policy face amount
• Option 2: Policy face amount plus the accumulated cash value
• Option 3: Policy face amount plus cumulative premiums paid minus surrenders

There are eight different rider options to choose from with IUL Accumulation II coverage. The policy also provides a 10-year no-lapse guarantee and the ability to take out policy loans if needed.

Indexed Universal Life Flex II (IUL Flex II)

The Principal Indexed Universal Life Flex II plan (or IUL Flex II) is available to applicants between the ages of 20 and 85, for as little as $100,000 in coverage. This policy enables you to invest your policy’s cash value for further growth over time, based on the performance of an underlying stock market index. Though this policy relies on the stock market for growth, interest-based returns will never drop below 0%–even when the market is performing poorly.

The IUL Flex II policy allows for partial surrender, offers fixed policy loans, provides a 10-year no-lapse guarantee, and offers three death benefit options (DBOs) to choose from.

Variable Universal Life Income IV (VUL Income IV)

With Variable Universal Life Income IV (VUL Income IV) coverage, policyholders can enjoy a secure death benefit along with the potential to grow that policy’s value over time through target-risk or target-date investments. It’s offered for issue from ages 0 through 85 with a policy face value starting at $100,000.

Policyholders can choose from three different death benefit options (DBOs) and add further protection through 10 optional riders. DBO options include:

• Option 1: Policy face amount
• Option 2: Policy face amount plus the accumulated cash value
• Option 3: Policy face amount plus cumulative premiums paid minus surrenders

There’s also no penalty for withdrawing funds before age 59½, nor are there income-based funding limits with this policy. While it is more aggressive—and thus riskier—than the other universal policies here, it does allow for even greater growth in the right market.

Available Riders

Life insurance riders offer additional benefits and coverage options to certain policyholders. Some of these riders are included automatically while others will need to be added to your Principal life policy. Additionally, it’s important to note that riders may be limited to certain policy types, locations, or even issue ages. 

Accelerated Benefits

If the insured policyholder is diagnosed with a terminal illness, he or she can pull from the life insurance policy’s death benefit to cover medical or personal expenses. Accelerated benefits are limited to the lesser of 75% of the policy’s face value or $1 million with a minimum payout of $500.

Principal considers accelerated benefits to be a lien against the policy, so the withdrawal will accrue interest. When the insured passes away, their beneficiaries will receive the policy’s value minus any withdrawn accelerated benefit, plus interest. There also is a one-time administrative charge of up to $150 to access this benefit.

Waiver of Premium

If you are disabled for six months or more, this rider allows you to keep your life insurance policy active and in good standing by waiving your monthly premiums. The rider expires at age 65 unless you’re already utilizing the benefit, in which case premiums will continue to be waived through age 95 or until your policy term ends, whichever comes first.

Cost of Living Increase

With this rider, you can elect to increase your life insurance coverage every three years through age 55. Doing so allows you to keep up with inflation and ensure that your policy is always enough to cover your living expenses, even decades after you’ve purchased it.

Children Term Insurance Rider

This rider allows you to add term coverage for your eligible children onto an existing life insurance policy. It covers kids as young as 14 days old, providing a death benefit between $5,000 and $25,000. Coverage also can be converted into a permanent policy up to the child’s 25th birthday.

Conversion Extension Rider

The conversion extension rider can be added at the time of policy issue and gives the insured an extended period of time to convert their term life insurance policy into permanent coverage. There is an additional charge to add this rider, and its coverage ends at age 70 or when the policy expires, whichever comes first.

Chronic Illness Death Benefit Advance Rider 

If you are diagnosed with a chronic illness, this rider grants the insured access to up to 75% of their policy’s value or $2 million (whichever is less). It’s not available in all states, but there is no additional charge for this rider on policies where it’s offered.

Customer Service

Principal life insurance policyholders have a few options when it comes to managing their life insurance coverage. 

If you’d prefer to reach a real person with your general questions, representatives are available. The number to call is 800-986-3343. Principal policyholders can also set up a personal account through the company’s online portal, at principal.com.

You also can send your request through the company’s online contact form. Yet another option is to consult their help FAQs.

Complaint Index

The National Association of Insurance Commissioners (NAIC) tracks complaints and helps consumers understand if they are happening more or less frequently than expected. 

This complaint index is adjusted according to the company’s market share so the baseline is always 1.00. If a company receives more complaints than expected, they’ll have a complaint index higher than 1.00; receiving fewer complaints than expected will instead earn them an index below 1.00.

According to data provided by the NAIC, Principal performs better than expected in terms of its complaint index. In 2021, the insurer’s complaint index was 0.26, an improvement over 2020, at 0.32.

Third-Party Ratings

Ratings from trusted third-party platforms can help consumers get an unbiased idea of a company’s strength and performance. 

According to the J.D. Power 2020 U.S. Life Insurance Study, Principal was ranked ninth among 23 listed companies.

When it comes to financial stability ratings, Principal has received an A+ (Superior) rating from AM Best. This is the second-highest rating possible and indicates a stable outlook for the insurer.

Cancellation Policy

If you decide that a Principal life insurance policy isn’t right for you after you’ve purchased it, there are a few routes you can take to cancel.

When it comes to term policies, there is no accumulated cash value, and the policy isn’t intended to be permanent. If you want to cancel, it’s as simple as submitting a request for such. Your policy also could be canceled by failing to pay monthly premiums as scheduled.

Things are a bit more difficult when it comes to canceling a permanent policy. With Principal, all universal life policies incur a surrender charge if the policy is terminated early. This charge—which varies according to the policy type and how far along into the policy termination happens—can have a significant impact on the cash surrender value.

Principal does offer a 61-day grace period on universal life policies before surrender charges occur. If scheduled payments are not made prior to the 62nd day, coverage is terminated and any applicable surrender fees are applied.

Price

When calculating the cost of your life insurance coverage, an insurer will take many different factors into consideration. These include the type of policy chosen, the amount of coverage added, as well as your:

• Age
• Gender*
• Health
• Personal and family medical history  

*Non-binary applicants will typically find that insurers base premiums on their assigned birth gender. Being non-binary will not directly affect your premiums or prevent you from purchasing coverage. Through Principal, you can request unisex life insurance rates in addition to traditional, gender-distinct rates.

Principal does offer an online term life quote calculator tool, which can help you determine how much coverage to buy and what it will cost.

Competition

Before choosing a life insurance company, it can be helpful to know how they measure up against the competition. This allows you to compare apples to apples and gauge whether you’re choosing the right policy for you, at the right price.

To this end, we have compared Principal life insurance against Banner Life, an insurer with a similar market share and ratings.