Life is short. But what if yours isn’t?

Life insurance policies are typically associated with payouts for the beneficiaries. But what if they could double as an investment plan for your golden years?

Indexed Universal Life Insurance policy (IUL) does exactly that. It’s an advanced form of Life insurance which provides

  1. Life protection/coverage
  2. Death benefits
  3. Cash value accumulation
  4. Fixed and indexed account equity investment growth

 

In short, this investment-oriented policy provides all the death benefits while also letting the insurer reap the benefits to help them fund their retirement years. Without having to worry about taxes, equity investments, or NASDAQ trends.

How it Works

When you buy an IUL Policy, you get a cash value account with a fixed and indexed equity account. Your premium payments, as per your policy are used for typical coverage and a part of it goes to your cash value sub-accounts. A fixed account is for the minimum guaranteed interest that we credit to your account each month while the interest of the indexed part of your account depends on market performance. This account can be liquidated, cashed-in, and used for borrowing at any point, or to pay your monthly premium.

In case of death, beneficiaries get death benefits. In the case of life, you get to see your cash grow and get to enjoy it as and when required.

Policy Highlights

Pros

  • Cash-accumulation each month.
  • Tax-deferred
  • Provides maximum benefits in case of an untimely death; providing coverage for your entire life
  • Flexible premium payment option as per your financial needs
  • Flexible death benefit and payout options.
  • Risk management features like floor and cap of cash value accounts. You can opt to place more cash in a fixed or indexed cash value account.

Cons

  • IUL costs more than other forms being an investment opportunity
  • With higher age comes a higher fee
  • Indexed account interest may not be according to projections if the stock market falls
  • With adjustability in policy, required premiums may be increased
  • Unlimited cash value growth is not an option due to policy capping.

Duration

IUL is a permanent policy that can last the entire lifetime. However, the insurer can withdraw from the policy and cash it anytime.

Policy floor & Cap

Policy floor & cap means the predetermined rate of growth for your indexed account. The floor is a minimum and the cap is the maximum interest that your account can get. In case of a downturn, you will be paid floor interest but in case of a boom, your interest will be limited to policy cap rate.

Policy Cost

If you are looking for an affordable policy, IUL may not be the perfect fit. Typically, for an Indexed policy you have to pay the following fees:

  1. Premium Load Charge: Transactional payment, generally costing per $1000 of the death benefit.
  2. Monthly Fee: transactional charge, typically for the first 10 years
  3. Annual Fee: Once a year cost, which is usually minimal, just to keep things running.
  4. Mortality Charge: This is associated with your death benefit and increases as you age.