Indexed Universal Life Insurance (IUL)
Flexible Life Insurance With Long-Term Potential
Indexed Universal Life insurance, commonly known as IUL, is a form of permanent life insurance that combines a death benefit with a cash value component whose interest crediting may be linked, in part, to the performance of a market index.
At ABPHOREX, we help individuals and families understand how IUL works, compare available policies, and determine whether this type of permanent life insurance fits their protection needs and long-term goals.
What Is Indexed Universal Life Insurance?
Indexed Universal Life insurance is a type of permanent life insurance designed to provide coverage as long as the policy remains in force.
In addition to a death benefit, an IUL policy can accumulate cash value. Interest credited to the policy may be based in part on the performance of a selected market index, subject to the policy's terms, including applicable caps, participation rates, spreads, floors, and other limitations.
Your policy is not directly invested in the stock market or the underlying index.
What Is Indexed Universal Life Insurance?
Indexed Universal Life insurance is a type of permanent life insurance designed to provide coverage as long as the policy remains in force.
In addition to a death benefit, an IUL policy can accumulate cash value. Interest credited to the policy may be based in part on the performance of a selected market index, subject to the policy's terms, including applicable caps, participation rates, spreads, floors, and other limitations.
Your policy is not directly invested in the stock market or the underlying index.
How Does an IUL Work?
Life Insurance Protection
An IUL provides a death benefit designed to help financially protect your beneficiaries if you die while the policy is in force.
Index-Linked Interest Crediting
Depending on the policy and crediting strategy selected, interest credited to cash value may be linked to the performance of a market index.
Downside Protection
Many indexed crediting strategies include a floor that can help protect the policy from receiving negative interest crediting solely because the linked index declines. However, policy charges and other costs can still reduce the policy's cash value.
Flexible Features
Universal life policies may provide flexibility in premium payments and death benefit options, subject to policy requirements and limitations. Paying insufficient premiums can negatively affect policy performance and may cause coverage to lapse.
Potential Benefits of an IUL
Indexed Universal Life insurance may be appropriate for people looking for permanent life insurance with additional flexibility and cash value accumulation potential.
Depending on the policy, benefits may include:
• Permanent life insurance protection
• Cash value accumulation potential
• Interest-crediting options linked to a market index
• Protection from direct stock-market losses within certain indexed crediting strategies
• Flexible premium and death benefit options
• Potential access to available cash value through policy loans or withdrawals
These features vary considerably among policies and insurance carriers.
Understanding Cash Value
Part of the premiums paid into an IUL policy may contribute to the policy's cash value after applicable insurance costs, expenses, and other policy charges.
The amount of interest credited depends on the policy and the performance of the selected crediting strategy. Caps, participation rates, spreads, floors, and other policy provisions can affect how much interest is credited.
Cash value growth is not the same as directly investing in a stock-market index, and an IUL does not receive the dividends paid by the securities included in an index.
Can You Access Your Cash Value?
Depending on the policy, accumulated cash value may be accessible through withdrawals or policy loans.
These funds may provide additional financial flexibility during your lifetime. However, loans and withdrawals can reduce the policy's cash value and death benefit, may increase the risk of the policy lapsing, and can have tax consequences.
Policy performance should be reviewed regularly, particularly when loans or withdrawals are taken.