Indexed Universal Life Insurance

IUL stands for Indexed Universal Life insurance, which is a type of permanent life insurance policy that offers a death benefit along with a cash value component. It is designed to provide life insurance coverage while also allowing the policyholder to potentially accumulate cash value over time.

Key features and benefits of Indexed Universal Life insurance (IUL):
  • Death Benefit: Like other life insurance policies, IUL provides a death benefit that is paid to the beneficiary upon the policyholder's death. The death benefit can be used to provide financial protection for loved ones, pay off debts, or cover final expenses.

  • Cash Value Growth: IUL policies have a cash value component that grows over time. The cash value is typically linked to the performance of a stock market index, such as the S&P 500. The policyholder has the potential to earn interest based on the positive performance of the chosen index.

  • Flexibility: IUL policies offer flexibility in premium payments. Policyholders can choose to pay the minimum required premium or contribute additional funds to increase the cash value growth potential. However, it's important to ensure that the policy remains in force by meeting the minimum premium requirements.

  • Market Participation with Protection: IUL policies allow participation in the stock market's upside potential through the index-linked interest crediting feature. However, they also offer downside protection, as the cash value is not directly invested in the market. Instead, it earns interest based on the performance of the index, subject to certain limitations and factors determined by the insurance company.

  • Tax Advantages: Similar to other types of permanent life insurance, IUL policies offer potential tax advantages. The cash value growth is tax-deferred, meaning you won't pay taxes on the earnings as long as the funds remain in the policy. Additionally, the death benefit is generally received income-tax-free by the beneficiary.

“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.” - Aristotle