Indexed universal life insurance (IUL) is a type of permanent life insurance that includes both a cash value and a death benefit. Your cash value account balance can earn interest depending on a stock market index selected by your insurer, like the S&P 500 or the NASDAQ Composite. Funds don’t pay a fixed interest rate but usually provide an interest rate guarantee.
Main Features of IUL Insurance
No fixed interest rate: According to the National Association of Insurance Commissioners (NAIC), money in your cash value-indexed account doesn’t earn a fixed interest rate when you purchase IUL insurance. Instead, your interest rate is determined by a market index established by your insurer. (This is distinct from a universal life insurance policy, which, according to the Insurance Information Institute (III), earns interest comparable to a money market account.) The Securities and Exchange Commission defines an index as “the performance of a certain basket of instruments, such as stocks or bonds.” According to the NAIC, your insurer chooses the index and then calculates an interest rate based on its performance. The life insurance provider credits the interest to your cash value account.
Interest rate guarantee: According to the NAIC, most plans include an interest rate guarantee, which ensures that a minimum interest rate is paid even if the index yields lower returns. Still, interest rates are usually restricted to a “cap” or upper limit.
Indexed Universal Life Insurance Has Various Other Benefits
Premium payments that can be adjusted (within limits): Your insurance will most likely specify a premium amount for you. If you have enough funds in your cash value account, you might be able to use it to help pay for your premiums.
Flexible death benefit: With an indexed universal life policy, death benefits are usually adjustable and can be reduced at any moment. However, increasing the death benefit might require passing a medical check.
Cash value access: In an emergency, you might be able to borrow from your IUL insurance policy; however, you’ll most likely be charged interest. You might be able to withdraw funds from your cash value account as well. Although, doing so may result in a permanent reduction in your death benefit. Withdrawals may potentially cause your policy to lapse if you don’t have a sufficient amount in your cash value account.
Who Would Buy Indexed Universal Life Insurance?
If you want lifelong life insurance and wish to grow your cash account over time, permanent life insurance may be a viable alternative.
According to the NAIC, indexed universal life insurance provides both market-based development potential and protection against value loss if the market declines. If these benefits appeal to you, you should consider indexed universal life insurance. Your insurance provider can assist you in determining if indexed universal life insurance is appropriate for you.
Contact Information:
Email: [email protected]
Phone: 7705402211
Bio:
Mack Hales has spent the past 4 decades helping clients prepare for retirement and manage their finances successfully. He also works with strategies that help clients put away much more money for their retirement than they could in an IRA or even a 401k. We involve the client’s CPA and/or their tax attorney to be sure the programs meet the proper tax codes. Mack works with Federal Employees to help them establish the right path before and after retirement. The goal is to help the client retire worry-free with as much tax-free income as possible and no worries about money at risk of market loss during retirement. ​ Mack has resided in Gainesville, GA since 1983, so this is considered home. Mack is married to his wife of 51 years, has two boys and five grandchildren.
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