Indexed Universal Life

Indexed Universal Life (IUL)

Universal life insurance is a part of the permanent life insurance category, which offers cash value. Universal life includes three types of policy structures, and the contracts provide the following:

Flexible premium options
Guaranteed death benefits
Living benefits, and
Cash value loan options

Keep reading to learn about one particular type of policy, Index Universal Life (IUL).

What Is IUL?

First, an index is a measure or indicator of something. Indexes are created to measure financial or economic data, including interest rates or inflation. IUL offers a fixed interest rate option and many selected Index options to earn higher potential interest rates.

What’s excellent about IUL insurance is that it reduces risk because no money is directly invested in the stock market. You can never lose money because of market declines.

So What?

As the policyholder, you get to choose how much cash value to assign to a fixed or an equity-indexed account. These insurance policies give you the chance to collect cash while still providing a death benefit.

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How Does IUL Work?

The Index accounts are tied to an index, like the S&P 500 or the Nasdaq-100. When the value of the index increases, you can participate in part of the gain — which is limited to a “Cap rate” or “Participation rate.”

For example, your cap rate may be 9.5%. If the S&P 500 grows by 10%, you get 9.5%. If the S&P 500 earns 7%, you get 7%. If the S&P 500 declines by -10%, you get 0.

The Pros of IUL Insurance

IUL policyholders in California enjoy low premiums, flexibility, less risk, and the cash value accumulation that comes with IUL insurance.

Amounts that you assign to the cash value grow tax-deferred. The cash value can pay the premiums, so you can reduce or stop having to pay out of pocket. You can access the cash value at any time with NO penalty — no matter your age.

As for the flexibility, you control the amount you risk in indexed accounts, and you can adjust the death benefit amounts as needed. Plus, most IUL policies offer plenty of optional riders, such as no-lapse guarantees and death benefit guarantees. And speaking of the death benefit it’s not subject to income or death taxes, and doesn’t have to go through probate. IULs also have no limits on annual contributions.

The Cons of IUL Insurance

On the flip side, there are some disadvantages of IUL insurance. It’s generally better for larger face amounts. Sometimes insurance carriers dictate a maximum participation rate that’s less than 100%. In other words, they place caps on accumulation percentages.

IUL policies are also based on an equity index — used to measure performance. If this index goes down, no interest is assigned to the cash value. The goal with IULs is to capitalize on the index moving up.

Is an IUL Policy Right for Me?

IUL insurance policies aren’t for everyone. However, they’re a practical option if you want the security of a fixed universal life policy and the potential to earn interest that comes with a variable policy. We can help you determine if IUL insurance is a good fit for you.

We Make it Easy to Protect Your Family.

Protecting your family doesn’t have to be hard. With Robinson Insurance Services, you can find a life insurance policy that’s right for you. We make it easy to get a FREE quote. Learn more about how you can protect your loved ones with life insurance, and get started today.

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Indexed Universal Life