Is Indexed Universal Life

Right For You?

What is Indexed Universal Life?

Indexed universal life, or IUL, is a type of life insurance policy that provides both a death benefit and a cash value component. The funds that are within the policy’s cash value differ from those in a whole life insurance policy, or even from a regular universal life insurance policy, because the return with an IUL policy is tracked based on the performance of an underlying market index. One of the more popular index options is the S&P 500. (The policy holder may also be able to choose more than one index to track, depending on the insurance carrier and the policy).
When the underlying index performs well in a given year, then the cash value is credited with a positive return – usually up to a “cap” that is set by the insurance company. If, however, the underlying index performs poorly in a given year, the policy holder will not lose value in the account, but will simply be credited with a 0% for that period. There is also an option to place the policy’s cash value funds into a fixed account.

Pros and Cons of Indexed Universal Life

What is IUL?

Indexed universal life, or IUL, is a type of life insurance policy that provides both a death benefit and a cash value component.

universal index life insurance

The IUL Policy

An indexed universal life policy is a type of insurance that allows the policy holder the opportunity to increase the policy’s cash value based on the return on an underlying market index.

Pros and Cons of Indexed Universal Life Policies

While many life insurance policies can provide you with death benefit protection, and some even provide a cash value build-up, indexed universal life insurance (IUL) is unique in that it gives you market-linked growth, as well as protection of principal.  These benefits come with drawbacks, however, such as the cost of life insurance and ‘Caps’ impacting the potential growth of the policy when compared to investing directly in the Stock market.  You must also be healthy enough to qualify for life insurance, meaning not everyone will be eligible.


  • Death benefit protection
  • Market-linked growth
  • Protection of principal
  • Tax-deferred
  • Potential tax-free withdrawals

While these plans may not be right for everyone, you owe it to yourself to see if IUL is right for you?


  • Cost of life insurance
  • Caps
  • Participation rates
  • Eligibility questions
  • Long-term Instrument

While IUL can be a win for some, the costs of life insurance, the need to be healthy enough to qualify and less growth potential than the stock market might mean an IUL is not right for you.

indexed universal life insurance


Potentially Tax-Free Withdrawals

An IRS provision allows for certain types of withdrawals and policy loans to be made, giving the policy owner the possibility of tax-free access to their cash value.

Protect Your Family

IUL policies, although they have growth potential, are a life insurance policy first, which means that your family will be protected by the death benefit the policy provides.

No Contribution Limits

IRAs and other qualified accounts have contribution limits, and they are not substantial enough for many people.

Tax-Deferred Growth

Growth inside an IUL policy is considered tax-deferred and won’t impact the taxes you pay as long as the policy remains in-force.

Is Indexed Universal Life Insurance Right For You?

  • Do you need life insurance?
  • What is your tax bracket?
  • Do You believe Taxes will rise in the future?
  • Are you eligible for a 401k?
  • What is your age?
  • What is your health?
  • How long until you retire?
  • What is your risk tolerance?
  • Disposable Income
  • Commitment to a Long-Term Savings Strategy