What is Indexed Universal Life Insurance

An indexed Universal Life Insurance Policy’s cash value can grow against a stock market index such as the S&P 500

An indexed universal life insurance (IUL) policy 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.

How does Indexed Universal Life work?

When you pay indexed universal life policy premiums, the portion that goes into the cash value is set into its own account. This account is then 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. While the interest rate on this account will vary based on market forces, it has both a cap; meaning it cannot go above a certain value, as well as a floor of zero. As long as policy premiums do not lapse, the account cannot lose money. 

Tax-Free Loans

As the account value grows, you can leverage your indexed universal life account with tax-free, low interest loans against the policy. There are no stipulations or restrictions for what this money can be used for; so you can use it for any major lifetime expense. People frequently use IUL money to pay for college expenses, family emergencies, and retirement. IULs can even be used for real estate investing. However, because IUL accounts do have capped interest, the account does take time to earn capital, so sooner is always better in opening an account.

Flexibility in Premium Payments

Over their lifetime, IUL policies also offer flexibility in premium payments. During the life of the policy, you can adjust the premium payments within certain limits. This you to invest more during prosperous times and less during lean ones, making them more flexible for your retirement ears.

Business Protection

An IUL account can also offer protection for your business by allowing insurance held by founders or other key businesspeople to pass the death benefit to the business instead of an individual. This cash can be a crucial component during transition between founders and finding their replacement.

How can I get an Indexed Universal Life Insurance policy?

While it might be tempting to try to get a quote for an IUL using an automatic online quoter or calculator, because of policy complexity, automated IUL calculators (or quoters) typically fall short when it comes to properly assessing the cost of an IUL policy. I recommend speaking with an experienced agent to get a complete picture of policy options. Please call 512-922-1273, use my contact form, or schedule a time to speak with me.