Indexed universal life also known as IUL insurance is a contract between you and an insurance company that is designed to which allows the owner to allocate a cash value amount to either a fixed account or an equity index account. Below is an article by Stephanie Powers updated April 13, 2022 where she talks about the 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 (IUL) 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.
Universal life (UL) insurance 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) insurance 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 Nasdaq-100 or the S&P 500.1 IUL insurance policies are more volatile than fixed ULs, but they are less risky than variable UL insurance policies, because no money is actually invested in equity positions.
IUL insurance policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. People who need permanent life insurance protection but wish to take advantage of possible cash accumulation via an equity index might use IULs as key person insurance for business owners, premium financing plans, or estate-planning vehicles. IULs are considered advanced life insurance products in that they can be difficult to adequately explain and understand.
When a premium is paid, a portion pays the cost of insurance based on the life of the insured. Any fees are paid, and the rest is added to the cash value. The total amount of cash value is credited with interest based on increases in an equity index (but it is not directly invested in the stock market).
Some policies allow the policyholder to select multiple indexes. IULs usually offer a guaranteed minimum fixed interest rate and a choice of indexes. Policyholders can decide the percentage allocated to the fixed and indexed accounts.
The value of the selected index is recorded at the beginning of the month and compared with the value at the end of the month. If the index increases during the month, the interest is added to the cash value. The index gains are credited back to the policy either on a monthly or an annual basis.
For example, if the index gained 6% from the beginning of June to the end of June, the 6% is multiplied by the cash value. The resulting interest is added to the cash value. Some policies calculate the index gains as the sum of the changes for the period, while other policies take an average of the daily gains for a month. If the index goes down instead of up, no interest is credited to the cash account.
The gains from the index are credited to the policy based on a percentage rate, referred to as the “participation rate.” The rate is set by the insurance company and can be anywhere from 25% to more than 100%. For example, if the gain is 6%, the participation rate is 50%, and the current cash value total is $10,000, $300 is added to the cash value (6% x 50% x $10,000 = $300).
IUL policies typically credit the index interest to cash accumulations either once a year or once every five years.
While not for everyone, IUL insurance policies are a viable option for people looking for the security of a fixed universal life policy and the interest-earning potential of a variable policy.
Author: By STEPHANIE POWERS
Updated April 13, 2022
Reviewed by THOMAS J. CATALANO
Fact checked by SUZANNE KVILHAUG
09:00 am – 05:00 pm
Disclaimers: This website is operated by Marcos Rubio, an independent licensed broker agent licensed in California, Florida, Hawaii, Arizona and Nevada, as an independent insurance agent. CA License #4033801, Florida License #W670799, Hawaii License #515531, Arizona License #19464742 and Nevada #3578407. Contracted with National IMO Company Family First Life. Copyright © 2020 Family First Life US - All Rights Reserved. Marcos Rubio does not underwrite any insurance that appears on our website. Insurance quotes appearing on this website are non-binding. While we have done our best to ensure all rates shown are accurate; human error is a possibility. In the rare event we made a mistake regarding pricing, the carrier’s rates will always supersede whatever rate appears on our website.
Not all products are available in all states. Product eligibility for each carrier varies depending on the following factors: resident state of the insured, age, and medical underwriting restrictions. All plans with no waiting period require an applicant to be medically approved by the insuring company and are subject to the incontestability period. All guaranteed acceptance plans that have no health questions will be subject to the insurer’s defined waiting period before benefits become payable under the policy provisions. In the rate event we made a mistake regarding pricing, the carrier's rates will always supersede whatever rates appear on our website.
Whole life final expense insurance available through Marcos Rubio insurance agency may be underwritten by any of the following insurance companies: AIG, American Amicable, American Continental Life Insurance Company (Aetna), American Home Life, Americo, Assurity, Baltimore Life, Foresters Financial, Gerber Life, Great Western, Kemper, Liberty Bankers Life, United of Omaha (Mutual of Omaha), Pekin Life, Prosperity Life Group, Royal Neighbors of America, Sentinel Security Life, Transamerica, or others.
Under no circumstances will Marcos Rubio Agency share or sell your information with a third party without your consent.
No part of this website may be copied, published, faxed, mailed or distributed in any manner without the prior written consent from the website owner.
Marcos Rubio Family First Life US © 2020- All rights reserved
Powered by Digital Marketing Agency, LLC