What is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) is a versatile financial product that combines life insurance coverage with an investment component. Unlike traditional whole life policies, IUL policies allow policyholders to allocate a portion of their premiums to a stock market index, which can provide potential growth for the cash value of the policy. This investment feature not only adds a savings element but also ensures a death benefit for the insured’s beneficiaries.
How Does Indexed Universal Life Insurance Work?
The beauty of IUL lies in its flexibility. Policyholders can adjust their premium payments and death benefits as their financial situation changes. The cash value grows based on a specified index, such as the S&P 500, while also offering a floor, typically around 0% to 2%, which protects the investment during market downturns. The result is a potentially higher return compared to whole life insurance products, with added safety features.
The Benefits of Choosing Indexed Universal Life Insurance
One of the primary benefits of Indexed Universal Life Insurance is its capability to provide both growth and protection. It allows for tax-deferred accumulation of cash value and offers flexibility in premium payments. Additionally, when structured properly, the death benefit can be paid out tax-free to beneficiaries. This makes IUL an attractive option for individuals seeking a balance between protection and growth in their life insurance policies.