Is indexed universal life insurance right for you?

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Is Indexed Universal Life Insurance Right For You?

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 policyholder 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 policyholder 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. Read More

IUL Explained
IUL Explained

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

IUL Policies
IUL Policies

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.

Is Indexed Universal Life Insurance Pros and Cons

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.

Benefits of IUL
  • Death benefit protection
  • Market-linked growth
  • Protection of principal
  • Tax-deferred
  • Potential tax-free withdrawals
Disadvantages of IUL
  • Cost of life insurance
  • Caps
  • Participation rates
  • Eligibility questions
  • Long-term Instrument

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