IUL

Indexed Universal Life Insurance Policies (IUL)

Indexed Universal Life (IUL) insurance policies are a relatively new 'hybrid' product that insurance companies offer, combining the best aspects of the fixed whole life and the variable life insurance.

The main distinguishing feature of this type of life insurance is that it allows you to invest the cash value in index options that follow the movement of an index, such as the Dow Jones Industrial Average and the S&P 500.

Benefits of Indexed Universal Life Insurance

  • You can earn a credited interest rate that is higher than traditional cash-value policies, without subjecting yourself to unnecessary risk.
  • Just like any permanent life policy, equity indexed universal life insurance provides the cash value element. The difference is that here you have the option to participate indirectly in the upward movement of a stock index without the downside risk associated with the stock market. The interest to the cash values increases with the upward annual movement of a stock index, not including the dividends.
  • Indexed universal life offers a number of tax advantages: death proceeds are not subject to tax at death; cash values build up tax-free and there is the possibility of tax-managed earnings for education or retirement.
  • With indexed universal life policies, the cash-surrender value can reach an annual growth cap of about 10-14 percent. In years when the equity index is flat, the cash value reaches the floor, which is usually guaranteed to be 0%. Some insurance companies offer a guarantee of a minimum interest rate for a certain period of time.

 

 
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