Indexed Universal Life Insurance
Combine the security of permanent life insurance with the growth potential of market-linked returns, all while protecting against downside risk.
How IUL Works
Indexed Universal Life insurance offers a unique combination of death benefit protection and cash value accumulation. Unlike traditional universal life insurance, IUL policies tie cash value growth to the performance of market indexes like the S&P 500.
The key advantage is the protection against market downturns through a guaranteed minimum interest rate (typically 0-1%), ensuring your cash value never decreases due to negative market performance.
This unique structure provides the potential for higher returns than traditional fixed life insurance products while offering more security than variable life insurance policies that directly invest in the market.
Key Features
- Permanent life insurance coverage
- Cash value growth potential linked to market indexes
- Downside protection with minimum guaranteed rates
- Tax-free death benefits for beneficiaries
- Permanent life insurance coverage
- Cash value growth potential linked to market indexes
- Downside protection with minimum guaranteed rates
- Tax-free death benefits for beneficiaries
- Tax-advantaged cash value growth
- Potential tax-free retirement income through policy loans
- Flexible premium payments
- Ability to adjust death benefit as needs change
Frequently Asked Questions
What exactly is Indexed Universal Life Insurance?
Indexed Universal Life (IUL) is a type of permanent life insurance that offers both a death benefit and cash value accumulation. The cash value growth is tied to the performance of a market index, such as the S&P 500, while providing protection against market downturns through a minimum guaranteed interest rate.
How does the index crediting work?
IUL policies credit interest to your cash value based on the performance of a chosen market index. If the index performs well, your cash value grows accordingly, up to a certain cap. If the index performs poorly, your cash value is protected by a floor rate (typically 0-1%), ensuring you don't lose money due to market downturns.
Is IUL better than a 401(k) or IRA?
IUL serves a different purpose than qualified retirement plans like 401(k)s or IRAs. While retirement accounts are specifically designed for retirement saving, IUL provides life insurance protection with a cash value component. IUL can complement traditional retirement accounts, especially for those who have maxed out their qualified plan contributions or seek tax-advantaged growth with access before age 59½.
How can I access the cash value in my IUL policy?
You can access your policy's cash value through policy loans or withdrawals. Policy loans are often tax-free and don't have to be repaid during your lifetime (though they reduce the death benefit if not repaid). Withdrawals up to your basis (the amount you've paid in premiums) are typically tax-free as well.
What happens if I stop paying premiums?
If you stop paying premiums and your policy has sufficient cash value, the policy may continue using the cash value to cover premium costs. If the cash value is depleted and premiums remain unpaid, the policy could lapse. Some policies include options to adjust coverage or convert to paid-up insurance with a reduced death benefit.
Ready to Explore IUL Options?
Schedule a consultation to discuss how an Indexed Universal Life policy can help secure your financial future and provide protection for your loved ones.
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