Make an investment - What is Indexed Universal Life (IUL)

Why invest in an Indexed Universal Life Policy

What Is Indexed Universal Life Insurance (IUL)?

  Indexed universal life (IUL) insurance is a type of permanent life insurance, meaning it has a cash value component along with a death benefit. The money in a policyholder's cash value account can earn interest by tracking a stock market index selected by the insurer, such as the Nasdaq-100 or the  Standard & Poor's 500 .  You may also have a fixed-rate account and can choose how much you want to go into each account. Although the interest rate derived from the equity index account can fluctuate, the policy does offer an interest rate guarantee, which limits your losses.

• Indexed universal life (IUL) insurance lets the policyholder decide how much cash value to assign to a fixed-rate account and an equity-indexed account.
• Indexed universal life is a form of permanent life insurance and like universal life, it allows for flexible premiums and possibly a flexible death benefit.
• IUL insurance policies can track a number of well-known equity indexes, such as the S&P 500 or the Nasdaq-100 to earn interest credits.
• IUL policies usually cap your returns but also guarantee a minimum interest rate.

How Does Indexed Universal Life (IUL) Insurance Work?

  As with universal life insurance, IUL policies have adjustable premiums. You can underpay or skip premiums, and you may be able to adjust your death benefit as well. What makes IUL different is the way the cash value is invested.

When you take out an indexed universal life insurance policy, the insurance company will help you select the index to use for all or part of the cash value account segment of your policy and your death benefit. When a  premium  is paid on the account, a portion pays the cost of insurance based on the insured's life. Any fees are paid, and the rest is added to the cash value.

The total cash value is credited with interest based on increases in an equity index (but isn't directly invested in the  stock market ). If you own an indexed universal life policy, you can likely borrow against the cash value accumulated in the policy. However, if you don't pay back your loans, they are deducted from the death benefit.

IUL insurance offers these main features, among others

• Permanent, lifelong coverage when premiums are kept up to date.
• Flexible premiums, and possibly a flexible death benefit.
• Cash value, along with potential growth of that value through an equity index account.
• Cash value can be partially allocated to a fixed interest option.
• Minimum interest rate guaranteed, but there may also be a cap on gains, typically around 8%-12%.
• Cash value built up can be used to lower or potentially cover premiums without subtracting from your death benefit.

Advantages of IUL Insurance

  IUL insurance policies are a viable option for people seeking permanent life insurance with a cash component that earns interest plus a death benefit. This type of  life insurance  is more expensive than  term life insurance , but you get permanent coverage and the death benefit paid tax-free to your beneficiaries when you die. The policy may even increase in value due to the  cash value component , and you may be able to borrow from your account.

Advantages

• Flexible premiums: As with standard universal life insurance, the policyholder can increase their premiums or lower them in times of hardship.
• Cash value accumulation: Amounts credited to the cash value grow  tax-deferred . The cash value can pay the insurance premiums, allowing the policyholder to reduce or stop making out-of-pocket premium payments.
• Investment flexibility: The policyholder controls the amount risked in equity-indexed accounts, and the death benefit amounts can be adjusted as needed. Most IUL insurance policies offer a host of optional  riders , from death benefit guarantees to no-lapse guarantees.
• Death benefit: This benefit is permanent, not subject to income or  death taxes , and not required to go through probate.
• Less risk: The policy is not directly invested in the stock market, thus reducing risk.
• Easier distribution: The cash value in IUL insurance policies can be accessed at any time without penalty, regardless of a person’s age.
• Unlimited contribution: IUL insurance policies have no limitations on annual contributions.

Is Indexed Universal Life Insurance (IUL) a Good Investment?

  An IUL can be a good way to save up money in a cash value account that, connected to a market index, may earn modest returns.

Can You Lose Money in an Indexed Universal Life Insurance Policy (IUL)?

  IUL insurance providers set a guarantee for your principal to protect it against losses in the market.

What is the advantage of investing in an IUL?

• Great as an investment for your children - Permanant life insurance that builds a cash value for their future.  Can also be borrowed against later in life as needed.
• Have financial protection for the family - Everybody should have some form of life insurance to protect their families from the cost of burial services to ongoing bills.  Why not have a life long policy that builds a bigger cash value and has a portion that can be used earlier in the case of a critical illness. 
• Build a fund that can be used in your later years 
• Have a fund that can be borrowed against in the case of need.

From a life insurance policy to building a cash value an IUL is a great way to invest to protect you, your family and your finances.

To talk to a specialist and determine the value and get a quote give us a call at (813) 367-4616 or schedule a consultation below