indexed universal life insurance
Life Insurance

What is IUL Insurance?

What is IUL Insurance? An indexed universal life (often abbreviated as IUL) is a type of universal life insurance policy that provides a death benefit. An IUL policy, however, offers several benefits because it is “universal”.  There are different types of universal life insurance policies. An example is a fixed rate that is subject to inflation. Another type is a variable rate, which is invested in the stock market, so it carries many risks.  In contrast to other universal life policies, an IUL does have certain advantages. With an IUL, you can take advantage of stock market returns without the risk of losing money. The principle of an Indexed Universal Life Policy is guaranteed*, while the interest rate is based on market conditions.  This can be an advantageous situation. Continue reading to answer “what is IUL insurance” and explore its benefits.

There are many ways in which IUL insurance can be beneficial to your retirement strategy. Your cash value is protected since your money is held by the insurance company. As an alternative, you can choose to tie your rate of return to an index. You won’t lose money when the market declines, unlike investing directly in an index fund. Therefore, your IUL cash value can generate a reasonable return**. By doing so, your policy’s cash value will increase when certain indexes do well while protecting you from losses. Whatever the market does, an IUL can protect your money.

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How Do IULs Work?

An insurance premium pays some of the cost based on the life expectancy of the insured. The fees are paid, and the rest is added to the cash value.  The value of this cash may earn an interest rate based on an index. The cash value is credited with interest based on the increase in an index (and there is no direct investment into the stock market). 

Several policies also allow you to select more than one index, as opposed to just one. This makes it possible to diversify your IUL. 

Depending on how your money is allocated, some can generate fixed interest while others fluctuate based on an index. Moreover, the third part of your money can yield interest from another index. Would you like to learn more about “what is IUL insurance and its benefits?”. There are several options to choose from to successfully plan for your retirement.

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Learn about the benefits

Benefits of IUL During Your Lifetime

IUL insurance can be beneficial for your retirement strategy. An IUL is an insurance product as opposed to investments, so you may have more flexibility. Tax laws and rules about your policy may differ between an IUL and a traditional retirement account. IUL insurance policies have no limitations on annual contributions like 401(k) or IRA. Furthermore, a person can withdraw cash value from an IUL policy at any time without penalty, regardless of their age. An IUL also does not require minimum distributions (RMDs) at age 72, either.

There are more benefits. For instance, your policy can be financed with a lump sum, or it can be paid overtime. You can also access your cash value as income without paying income taxes since it is fluid. Also, the distributions from IULs are tax-deferred. A very important aspect to you may be that your death benefit can be accessed while you are alive, tax-deferred, to pay for long-term care. 

Protecting Your Family’s Legacy

Some of your wealth may be left to your family when you pass away. The death benefit may increase over time, depending on how the IUL’s index performs. Typically, your beneficiaries receive far more money than you originally contributed. Benefits are permanent, are not taxable, and do not need to go through probate. 

What is IUL insurance? TW Retirement Strategies can help you find a life insurance product that is right for you and protects your loved ones.

*Backed by the claims-paying ability of the carrier.    **Reasonable rate of return over time.

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