Indexed Universal Life Insurance

What if you could get the flexibility of adjustable life insurance premiums and face value and an opportunity to increase cash value—would you go for it? What if you could get this without the inherent downside risk of investing in the equities market? All of this is possible with an indexed universal life insurance policy. These policies aren’t for everyone, so read on to find out if this combination of flexibility and investment growth is a good fit for you.

What Is Universal Life?

Universal life insurance (UL) comes in a lot of different flavors, from fixed-rate models to variable ones, where you select various equity accounts to invest in.

Indexed universal life  (IUL) allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Policies offer a variety of well-known indexes such as the S&P 500 or the Nasdaq 100. IUL policies are more volatile than fixed ULs, but less risky than variable universal life policies because no money is actually invested in equity positions.

Benefits of UL/IUL’s

Unlike with traditional 401(k)s,UL/IUL is funded with non-qualified money, or after-tax dollars. So, what you pay intoUL/IUL has been taxed already. That’s good news for future income – potentially tax-free retirement income! UL/IUL also offers the advantage of a tax-efficient death benefitfor loved ones.

With a universallife insurance policy, the insured is protected with a guaranteed amount of death benefit proceeds. In addition, funds that are in the policy’s savings component are invested to provide the policy holder with cash value build up. Over time, this cash can grow on a tax deferred basis.

Universal life insurance policies have a maturity date which occurs when you turn a certain age (often between 85 to 121). When a policyreaches its maturity date, you generally receive a payment and coverage ends.

Pros

  • Cash value grows at a variable interest rate, which could yield higher returns
  • More opportunity to increase the policy’s cash value

Cons

  • Variable rates also mean that the interest on the cash value could be low
  • A policy usually needs to have a positive cash value to remain active

Which is better term or universal life insurance?

The major difference between universal life and other permanent policies is that the payments are flexible. Like term life, universal life offers a tax-free death benefit. However, it’s more of an investment. A portion of each premium is invested to give your policy a cash value.

Which life insurance plan will work for you?  Contact us and we can help you decide.  Let us take the guess work out of which plan will help you and your family.