What is Indexed Universal Life Insurance?

Fixed-Index Universal Life (FIUL) insurance is a type of permanent life insurance that provides two key benefits: a death benefit to protect your loved ones and a cash value that can grow over time. FIUL policies are flexible, allowing you to adjust your premium payments within a set range, which can be helpful for people with fluctuating incomes. At the lower end, premiums may even be similar to term life insurance costs. The cash value in an FIUL policy can grow based on a market index, offering potential growth without directly investing in the market. Like other permanent life insurance policies, FIUL provides tax advantages, allows borrowing against the cash value, and ensures a death benefit for your beneficiaries.

Indexed Universal Life Insurance vs. Whole Life Insurance

Both types of policies provide permanent protection with an investment component that can grow over time, but IUL (like other UL policies) provides more flexibility to deal with changing circumstances by allowing you the policyholder the option of raising or lowering your premium payments. In addition, an indexed UL policy gives you one or more index-based options that can help your cash value grow faster while still limiting your downside risk. But there are downsides as well: IUL policies are more complex, the cash value growth and the expenses are decoupled, so the cash value needs to be managed to some degree, if only to ensure that your cash value doesn’t drop below a minimum threshold. Your cash value can stop growing and, in some cases, if the expenses exceed the cash value growth, even go down, especially if you only make minimum premium payments. This could force you to make higher payments later on, lower the death benefit amount, or forego your coverage altogether.

Indexed Universal Life Insurance vs. Term Life Insurance

Term life is the simplest form of life insurance protection: With a typical term policy you pay a set monthly premium for 10, 20, or 30 years, and if you pass away during that term a death benefit is paid to your family. The downside is, the coverage is temporary with little flexibility to deal with changing circumstances and there’s no cash value. Typically, the only substantial change you can make after your term policy is in effect is to convert it to a whole life policy. By contrast, indexed UL gives you a more flexible – and complex – financial tool with benefits that can last a lifetime. You get permanent life insurance protection with the freedom to lower your premiums (within contract limits) to a level that may be comparable to a typical term premium. You get the advantages of cash value with the potential for greater growth (compared to other kinds of permanent life) along with the assurance of a performance floor that can help reduce risk. IUL (like a whole life policy) can also provide tax-advantaged estate planning benefits not available with temporary term coverage.

Business Owners and Professionals

Life insurance provides a solid financial foundation and serves as a versatile tool for businesses of all sizes. Organizations can use life insurance as a valuable benefit to attract top talent and build loyalty by helping employees protect their loved ones. Business owners can use life insurance for additional purposes including protecting their company, family, partners and key employees from an unexpected death.