Indexed Universal Life is a relatively new form of permanent life insurance. As the name implies, an IUL is a universal life policy where your premiums are flexible and charges are based on the company's current expenses. As with a fixed indexed annuity, it differs in how interest is credited. Instead of a fixed or current interest rate, the policy's cash value grows tax-deferred subject to a cap and floor according to how a stock index, normally the S&P 500, performs over the course of a year. There are several index options as well as several options on how much you want to participate in the stock market.
Indexed Universal Life is an extremely flexible option that can help you prepare for meaningful life decisions depending on how you fund your policy. The following are some ways you can use an IUL:
- Retirement planning
- College education fund
- Down payment on a new house
- Planning your wedding
Investing in an IUL provides you with life insurance, but also the investment in the stock market with limited exposure to all of the risks and gains an index may face. The cash value growth in an IUL provides flexibility to your investment and provides you with a fund that can help you make your next big decision.
Is an IUL right for me?
An IUL works for an investor who wants their life insurance to help them during their lifetime. If you are an investor who is comfortable having a part of your retirement tied to a stock index, this is a great option for you. An area IUL's excel in are as supplemental retirement income outside of or above an IRA or 401(k). IUL's are a great option to provide a tax-deferred investment that grows throughout your lifetime.