What is indexed universal life (IUL)?
Indexed universal life, or IUL, is permanent life insurance whose cash value grows based on the movement of a market index, like the S&P 500. It has a floor, usually 0%, so a bad market year does not reduce the cash value from index losses. It gives you lifetime coverage and a long-term savings component in one policy.
By Joseph Citrola, independent life insurance agent with Fastlane Financial. Licensed, NPN 20686856.
How the growth works
Each year the insurance company credits your cash value based on how the index did, up to a cap set by the company. If the index goes up, you are credited part of that gain. If it goes down, you are credited zero rather than losing money to the index. Policy charges still apply.
Flexible payments
Unlike whole life, you can pay more or less within limits. Paying more builds cash value faster. Paying too little for too long can cause the policy to lapse, so it needs to be set up carefully.
Who it is for
People who want lifetime coverage and are also looking for a tax-advantaged place to build long-term cash value, and who can commit to funding it properly.
How I help
IUL is the product that most often gets sold badly. I show you how the caps, floors and charges actually work, and I will tell you if a simpler policy fits you better.
Common questions
Can I lose money in an IUL?
The index floor protects the cash value from market losses, but policy charges still come out every year. If the policy is underfunded, cash value can go down.
Is an IUL an investment?
No. It is life insurance with a cash value feature. It is not a replacement for a retirement account, though many people use it alongside one.
How do I take money out?
Usually through policy loans, which are generally not taxed. Loans and withdrawals reduce the death benefit.
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