Indexed Universal Life (IUL): The Blend of Permanent Coverage and Market Potential

Indexed Universal Life (IUL) insurance is a type of permanent life insurance that offers lifelong protection and a cash value component tied to the performance of a stock market index (such as the S&P 500), but with built-in protections against market downturns.

How IUL Cash Value Works

Unlike the fixed, guaranteed growth of Whole Life, the cash value in an IUL policy is credited interest based on the movement of a chosen index. Key features include:

• Cap Rate: The maximum interest rate the policy can earn in a given year, regardless of how well the index performs.
• Floor Rate (0% Guarantee): The minimum interest rate credited to the cash value, ensuring the policy does not lose money due to market declines.
• Participation Rate: The percentage of the index’s gain that is credited to the policy.

The Appeal of IUL

IUL is attractive to individuals who want the tax-deferred growth and lifetime protection of permanent insurance but are looking for the potential for higher cash value accumulation than a traditional Whole Life policy offers, without the risk of directly investing in the market.

Disclaimer: This content is for informational purposes only and is not financial or legal advice. IUL policies involve fees and are complex; consult a qualified professional before making a purchase decision.