Indexed universal life (IUL)
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Frequently Asked Questions
How does the cash value in an IUL policy grow?
The cash value in an IUL policy grows based on the performance of a selected stock market index. If the index performs well, your cash value may increase, but it is also protected by a “floor,” meaning it won’t lose value if the index performs poorly. Growth may be capped, so there’s a limit to how much your cash value can increase in a given period.
What is the "cap" in an IUL policy?
The cap is the maximum percentage of gain that can be credited to your cash value from the index’s performance. For example, if your policy has a cap of 7% and the index earns 10% in a year, your account will only be credited with 7% growth.
What happens if the stock market performs poorly?
If the stock market performs negatively, your IUL policy’s cash value won’t lose money due to market downturns. Instead, it will typically earn a 0% return for that period, ensuring your principal remains intact.
Are there any tax benefits with an IUL policy?
Yes, the cash value in an IUL policy grows on a tax-deferred basis. This means you won’t pay taxes on the growth until you withdraw the money, allowing your funds to compound over time.
"Secure Your Future with Indexed Universal Life (IUL)"
Indexed Universal Life (IUL) insurance is a form of permanent life insurance that offers lifelong death benefit protection along with a cash value component. Unlike standard universal life insurance, IUL provides the potential for higher returns while protecting against market downturns. What distinguishes IUL is the way interest is credited to the cash value. In addition to a guaranteed interest rate, IUL allows you to earn returns based on the performance of a stock market index, like the S&P 500.
Interest credited to an Indexed Universal Life (IUL) policy offers the potential for higher returns compared to whole life or regular universal life insurance. When the underlying index performs positively, your account can be credited up to a specified cap. For instance, if your policy has a 7% cap and the index returns 8% in a year, your cash value could be credited with 7%. In years when the index performs negatively, your cash value is protected with a 0% return, safeguarding your principal and allowing continued growth without the need to recover from losses.
Additionally, the funds in your cash value account grow on a tax-deferred basis, meaning you won’t owe taxes until you withdraw the money. This allows your account to compound over time.
As a permanent life insurance policy, IUL ensures lifelong coverage, meaning your loved ones will receive an income-tax-free death benefit whenever you pass away. Unlike term life insurance, IUL does not expire after a set period, and as long as you maintain premium payments, your coverage remains in force—even if health conditions make you uninsurable in the future.
While many life insurance policies offer death benefit protection and some even allow for cash value accumulation, Indexed Universal Life (IUL) insurance stands out by providing market-linked growth with principal protection. This means you can benefit from potential market gains without the risk of losing your initial investment. However, there are trade-offs to consider. The cost of life insurance and policy caps can limit potential growth compared to direct stock market investments. Additionally, qualifying for an IUL policy requires good health, so not everyone may be eligible.
Secure Your Peace of Mind!
Protect your loved ones and build wealth with the power of Indexed Universal Life insurance—where security meets opportunity.