What is Indexed Universal Life (IUL) Insurance?

An indexed universal life insurance policy, also known as an “IUL”, is a type of permanent life insurance that provides a cash value component, meaning you can borrow against the policy during your lifetime, as well as a death benefit component, which provides protection for your loved ones when you pass. Indexed universal life policy premiums are split between the cash value and the death benefit.

The cash value of an IUL account  is connected to the performance of a stock market index, such as the S&P. Because of this relationship between your IUL and the market, the cash value can grow throughout your life time. Additionally, because an IUL account has a floor of zero, as long as policy premiums do not lapse, the account cannot lose money.

What Are the Benefits of Indexed Universal Life insurance?

Tax-free cash value loans

As long as your policy remains current, you can borrow against your IUL account’s cash value at a low interest rate and without paying taxes on the loan. The loan actually never requires repayment; its value is taken from your death benefit when you pass. So whether you have needs for retirement, college expenses or family emergencies, your cash is available to you.

Death Benefit

Like all insurance policies, Indexed Universal Life Insurance offers a death benefit. This value is typically considerably higher than the cash value portion of your policy, and goes to your benefactors when you pass. It can also be used for “living benefits”, as described below. Death benefits are not considered income and are tax-exempt.

Living Benefits

Most IUL policies have an accelerated death benefit clause, meaning you can draw against your death benefit in case of illness such as critical or chronic illness. These are known in the industry as “living benefits”; when you access them while you are still alive it is called a policy acceleration. This feature provides an extra layer of insurance protection for you and your family. What types of illness (chronic, critical, or terminal) the living benefits covers depends upon the policy type purchased, but all offer living benefits in some capacity.

Should I Get a Policy?

Health status: Like any insurance policy, good health will help you qualify for the best rates with an IUL, and more serious health conditions usually mean you get costlier rates. However, resolved health conditions will have less impact on policy. If you’re interested in pursuing a policy, its important to talk to an experienced agent to help you properly qualify and get you the best rates.

There are a lot of factors that will come into play when considering whether you should purchase an IUL. They include but are not limited to the following.

Age: The younger you are, the more time you will have for your cash value to grow to a level that will provide access to substantial value for loans. However, as you get older there are policy structures that can be put in place that will allow you to gain substantial value if you are able to put more money into your policy. In fact, being older can work in your favor as you grow more personal capital that you can use to invest in a policy. Where you are in life will impact your policy structure and cost.

Ability to fund a policy: Investing in a policy requires that you have the ability to keep the policy current, and the capital to fund it so that it can grow. Unpaid premiums will limit your ability to access the cash value in your policy, so its important to work with someone who can help you structure a policy that is sustainable to you.

 At Gallant Life Insurance, we are a husband-wife team who have built Index Universal Life (IUL) policies for hundreds of individuals across all age groups and health brackets. When you reach out, you will speak only to us, not to a call center. If you would like to get a quote, feel free to call 512-922-1273, schedule a time or fill out our contact form below.
We offer a no-pressure consultation.