Life insurance offers premium flexibility and an adjustable death benefit with the ability to earn interest based in part on the change in value of a major market or custom index, without directly participating in the markets.
Indexed universal life (IUL) insurance allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Policies offer a variety of well-known indexes, such as the Nasdaq-100 or the S&P 500.1 IUL insurance policies are more volatile than fixed ULs, but they are less risky than variable UL insurance policies, because no money is actually invested in equity positions.
IUL insurance policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. People who need permanent life insurance protection but wish to take advantage of possible cash accumulation via an equity index might use IULs as key person insurance for business owners, premium financing plans, or estate-planning vehicles. IULs are considered advanced life insurance products in that they can be difficult to adequately explain and understand.
The policyholder bears the risk, so the premiums are low.
The policy is not directly invested in the stock market, thus reducing risk.
This benefit is permanent, not subject to income or death taxes, and not required to go through probate
The policyholder controls the amount risked in indexed accounts, and the death benefit amounts can be adjusted as needed.3 Most IUL insurance policies offer a host of optional riders, from death benefit guarantees to no-lapse guarantees.
Amounts credited to the cash value grow tax-deferred. The cash value can pay the insurance premiums, allowing the policyholder to reduce or stop making out-of-pocket premium payments.
The cash value in IUL insurance policies can be accessed at any time without penalty, regardless of a person’s age.
IUL insurance policies have no limitations on annual contributions.