Key Benefits of Indexed Universal Life (IUL) Policies

Potential Advantages of IUL Policies

Unlike direct market investments, an IUL policy offers principal protection, as the cash value is credited with 0% in years when the underlying index experiences a negative return. Additionally, because the cash value grows on a tax-deferred basis, gains are not taxed until they are withdrawn, allowing the cash value to grow and compound over time. By utilizing a policy loan, the funds in the cash value can be accessed tax-free.

These tax-free funds can be used for various purposes, such as supplementing retirement income, covering a child’s or grandchild’s education costs, or paying off high-interest debt. Similar to traditional universal life insurance, IUL policies offer flexibility in deciding how much of the premium is allocated to the cash value and how much goes toward the death benefit. Since IUL is a type of permanent life insurance, the death benefit remains in place for the insured’s lifetime, provided premiums are paid. In some cases, the cash value may be sufficient to cover future premiums, offering the option to stop paying out of pocket.