IUL guide
What is Indexed Universal Life?
Permanent life insurance. Part of the premium pays for protection. Another part may build cash value using a formula linked to a market index — not the stocks themselves.
How the money can move
Select a step for the short version.
Premium
What you pay. Whether it stays funded affects whether the policy can do the job you hoped.
Potential benefits
- Life insurance protection, subject to the policy and insurer
- Possible cash-value growth if the policy is funded for it
- Tax-deferred cash value under applicable rules
- Possible access to value, subject to policy terms
Considerations
- Charges continue and can reduce cash value
- Surrender periods can limit early access
- Caps and participation rates limit credited interest
- Illustrations are assumptions, not promises
- Loans can reduce value; a lapse with a loan can be taxable
- Fit depends on health, budget, and the need for insurance
Key words
- Indexing
- The insurer uses an index in a formula. You do not own the index.
- Cap / participation
- Limits on how much of an index change can become credited interest.
- Cash value
- Account value after charges. Not a bank deposit.
- Policy loan
- Access that usually accrues interest and can reduce the death benefit. A lapse with a loan can be taxable.
An IUL is not a guaranteed replacement for retirement accounts. Whether it belongs in your plan is a personal question.
Is an IUL Right for Me?Educational information only. This page cannot determine suitability. Guarantees, if any, are in a specific policy and depend on the insurer.
