Indexed universal life insurance is a type of permanent life insurance. It stays in force as long as you stay current on your premium payments or until you reach the maturity date specified in the policy. Many IULs mature when the insured person reaches age 121.
Indexed universal life insurance has a cash value component where the gains and losses are tied to an index like the S&P 500. While the cash value rises and falls with the index, the insurance company actually invests in things like bonds and mortgages.
You can borrow against your cash value through a policy loan or withdraw cash value. When you die, your beneficiaries receive a death benefit, but the death benefit amount will be reduced by any loans not paid back or withdrawals you’ve taken from the cash value.
Universal life insurance sometimes has added flexibility to change your death benefits and/or premium payments, but only within specified limits. The main difference between indexed universal life insurance and other universal life insurance policies is how cash value accumulates.The insurance industry is constantly evolving. Insurance providers are forever trying to refine the balance between cost and coverage. As competition gets stronger, companies are working harder than ever to bring you the best protection at a price you can afford.
Pros and Cons of IUL
Every financial product has advantages and disadvantages. While the details vary from insurer to insurer, we’ve highlighted some of the most common features below. Discuss your needs with a licensed insurance agent to get more details.
Cash value access
Limited upside exposure
Returns diminished by fees
Other investments may be better
Minimal regulatory oversight