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.
Indexed universal life, or IUL, is a type of life insurance policy that provides both a death benefit and a cash value component.
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.
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.
While these plans may not be right for everyone, you owe it to yourself to see if IUL is right for you?
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.
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.
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.
IRAs and other qualified accounts have contribution limits, and they are not substantial enough for many people.
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.
|Married filing jointly or qualifying widow/widower||Married filing separately:||Head of household:|
|10%||Up to $9,225||Up to $18,450||Up to $9,225||Up to $13,150|
|15%||$9,226 to $37,450||$18,451 to $74,900||$9,226 to $37,450||$13,151 to $50,200|
|25%||$37,451 to $90,750||$74,901 to $151,200||$37,451 to $75,600||$50,201 to $129,600|
|28%||$90,751 to $189,300||$151,201 to $230,450||$75,601 to $115,225||$129,601 to $209,850|
|33%||$189,301 to $411,500||$230,451 to $411,500||$115,226 to $205,750||$209,851 to $411,500|
|35%||$411,501 to $413,200||$411,501 to $464,850||$205,751 to $232,425||$411,501 to $439,000|
|39.60%||$413,201 or more||$464,851 or more||$232,426 or more||$439,001 or more|