Life Insurance

What Is An IUL?
What Is

Index Universal Life Insurance?

The index universal life (IUL) insurance policy, offers death benefits. However, IULs not only provide death benefits but several additional benefits: 

  • Protecting financial assets
  • Flexible options
  • Access to the cash value of the insurance policy

Index Universal Life Insurance is Available in Several Forms

There are several types of universal life insurance. Inflation-adjusted fixed-rate insurance is one example. Another type is the variable rate, which invests in the stock market, so it comes with larger risk. 

In comparison to other universal life insurance policies, index universal life insurance has some advantages. IUL policies have a higher growth potential than universal life insurance policies. This may be an attractive option for those seeking flexible coverage. With IULs you may be able to achieve some of the upside potentials of the stock market but without any of the downside risks. The reason for this is that in an IUL, the principal* is guaranteed, whereas the interest rate is determined by market conditions. The combination of these two factors is therefore advantageous. We can help you explore your options at Retirement Planners of Texas, based on your needs.

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How IUL Policies Work

The premium covers a portion of the cost based on how long an insured person lives. The remaining portion is added to the cash value. While IUL policies don’t directly invest in the stock market, your money may earn interest according to an index. This interest is credited when the index goes up. You can also choose more than one index rather than just one in some policies. This gives you more flexibility in choosing your IUL. 

You can allocate your money in several ways. There are some policies with fixed interest rates and others that fluctuate based on a specific index. You can earn interest in cash as well. If you decide to contribute to another index, the third part of your money will also earn interest. 

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Benefits of Index Universal Life Insurance for a Lifetime

Keep Your Money Safe

Your money is protected by the insurance company. You can also set your return rate based on an index. Despite being linked to indices, IULs do not directly invest in them. Therefore, if the market falls, you will not lose money. Therefore, you can earn a reasonable return* on the cash value of your IUL. No matter what the market does, your funds are protected.

Flexible Options

IULs may have more flexibility because they are not investments, but insurance products. Traditional retirement accounts and IULs have different tax laws. Unlike 401(k)s or IRAs, IUL policies do not have annual contribution limits. A cash value IUL policy can be withdrawn at any time without penalty. Additionally, there are no required minimum distributions (RMDs) at 72. You can also finance the policy by taking a lump sum or paying overtime. Because it is fluid, you can also claim it as income without paying taxes. You can also receive distributions tax-free* from IULs. Also, if you require long-term care, you can access your death benefit tax-free* while still alive. 

The Future of Your Family

When you die, your family may inherit some of your wealth. The death benefit may increase as the index increases. As a result, your beneficiary usually receives more than the original contribution. Also, the benefits they receive are also non-taxable and not subject to probate. 

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