Indexed Universal life insurance is one of the best universal insurance policies on the market for individuals that are interested in long-term growth and the potential for tax-advantaged retirement income. However, it is a good idea to conduct a thorough review of any retirement and life insurance vehicle you may purchase. Getting the right insurance and retirement policies are one of the most important steps towards financial security, and there are many IUL reviews to consider. The most important thing you can do when it comes to buying an IUL policy is to make an informed decision and work with a financial professional who specializes in indexed universal life insurance.
The IUL Structure Review
For you to make an informed decision on Indexed Universal Life Insurance, it is advisable to consider a few different points such as your retirement plan, when you will begin drawing income from your savings, your current and likely retirement income tax bracket, your financial protection needs and your current health. Other factors to consider when conducting an IUL review include; the amount of disposable income, investment risk tolerance, and expected income streams during retirement.
Traditional life insurance does not offer the investment option like indexed universal life insurance plans, and that is why there has been so much interest in the Indexed Universal Life Insurance. Annual IUL sales are approximately $2 Billion per year and have been increasing steadily. An IUL insurance plan has a separate cash value option that offers policyholders an opportunity to earn interest from the funds deposited in the cash value account. The structure of the cash value portion of the IUL policy is different from other universal life insurance especially when it comes to interest calculation. IUL premium payments are credited with growth according to the policy’s crediting and cap rates. This crediting can generate growth in the cash value of the policy and can provide larger long-term growth rates vs. whole life policies, etc.
The premium payment goes to the policy cash value, fees, and the insurance costs. As the index increases, the cash value can also grow. Universal life insurance plans are similar in many different ways, and if you understand how traditional universal policies work, it is likely that you will understand how the IUL policy works too. The tax-deferred growth associated with the cash value of an IUL means that, along with the amount you can contribute to an IUL compared to Roth IRA or 401k, IUL policies can be very attractive retirement savings vehicles.
Universal life insurance plans like IULs offer very attractive long-term growth potential due to their index exposure and guaranteed principal. The other interesting observation about the IUL policy is that its premiums are very competitive when compared to insurance plans for traditional insurance policies. In instances where the target index fails, the cash value does not decrease hence leading to a lower investment risk as compared to stocks. In fact, some policyholders may experience higher long-term returns as compared to investing in the stock market, especially during times of increased stock market volatility.
On the other hand, individuals opposed to the IUL investment policy argue that the return will always be lower than the index as insurance companies may Cap gains in an IUL or offer a crediting rate that further reduces the growth in the policy.
In summary, the IUL policy is attractive as a result of its ability to offer tax-free returns and the potential of tax-free withdrawals on top of the normal death benefit offered by traditional life insurance policies. A thorough indexed universal life insurance reviews policy and with the help of an IUL expert enables one to make the right decision when selecting a life insurance policy.