What is IUL?
IUL, or indexed universal life insurance, is a type of permanent life insurance policy that offers death benefit protection for your lifetime, as well as a cash value component that provides you with the opportunity for higher returns than regular universal life insurance yet without downside market risk.
How does Indexed Universal Life Insurance work?
Indexed Universal Life (IUL) insurance is a form of permanent life insurance that provides lifetime death benefit protection while also including a cash value component. This cash value offers the potential for higher returns compared to standard universal life insurance, without the risk of market downturns.
What sets IUL apart from other permanent life insurance policies is the way interest is credited to the cash value. In addition to a set interest rate, IUL allows for returns that are linked to the performance of a stock market index, like the S&P 500.
Is IUL The Right Choice For You?
Indexed Universal Life (IUL) policies aren’t suitable for everyone. If you’re interested, it’s essential to connect with a licensed agent who can help you explore your options and determine if an IUL is the right fit for your financial goals and needs.
How an IUL Works?
The way interest is credited to an Indexed Universal Life (IUL) policy offers the potential for higher returns compared to whole life or standard universal life insurance policies. For instance, in years when the underlying market index performs well, your account is credited with that return, up to a specified cap. If your policy has a 7% cap and the index returns 8%, your account will be credited with 7%. In years when the index performs poorly, your account will be credited with a 0% return, safeguarding your principal and allowing your cash value to grow without incurring any losses.
Additionally, the cash value in your account grows on a tax-deferred basis, meaning taxes are not owed until the funds are withdrawn. This allows your account to grow and compound over time.
Since IUL is a permanent life insurance policy, it offers the assurance that your loved ones will be financially protected with a tax-free death benefit. Unlike term life insurance, IUL policies do not expire after a set period, so as long as you keep paying the premiums, your coverage will remain active, even if a future health condition makes you uninsurable.
What are riders in IUL insurance?
With many IUL riders available in the market, here’s a list of the top options:
Long-Term Care Rider: Offers income to cover long-term care expenses for policyholders in nursing homes, home care, or assisted living facilities.
Accelerated Benefit Rider: Allows a portion of the death benefit to be used for healthcare expenses.
Adjustable Term Insurance Rider: Increases coverage by adding a term life policy.
Additional Insured Rider: Extends coverage to include a spouse or children.
Chronic Illness Rider: Provides part of the benefits to help cover chronic illness-related costs.