When it comes to life insurance, most people think of either term or whole life policies. But there’s a third option that combines protection with potential for growth: Indexed Universal Life (IUL).
Once you understand how an UIL works, you might find it is one of the most flexible and powerful financial tools for both protection and wealth-building.
An UIL is a type of permanent (whole) life insurance that offers a death benefit just like other life insurance policies. What sets it apart is the way it grows cash value.
Instead of earning a fixed rate like whole life policies, or having no cash value growth at all like term life policies, the cash value in an IUL is tied to the performance of an market index such as the S&P 500. This means it has the potential to grow more than traditional policies, but without the same level of risk as directly investing in the stock market.
IULs typically include a floor and a cap. For example, your policy might guarantee that even in a bad market year, your cash value won’t lose money (a zero percent floor). In good years, your growth might be capped at a certain percentage.
Each month, a portion of your premium goes toward your death benefit. The rest goes into your policy’s cash value account, where it earns interest based on the performance of the chosen index.
Over time, you can access that cash value for:
- Emergency expenses
- Tax-free retirement income (via policy loans)
- College funding
- Funding a business or investing a real estate
It is your money, growing inside your policy, with access when you need it.
Indexed Universal Life Benefits:
Unlike term life insurance, which expires after a set number of years, an UIL is designed to last your entire life as long as you maintain the policy. This gives your family peace of mind no matter when you pass.
The cash value grows tax-deferred, and you can access it tax-free through policy loans. This makes it a valuable strategy for supplementing your retirement income while avoiding traditional tax burdens.
Because of the floor, your cash value won’t decrease due to market downturns. You can still benefit from positive market years without the full exposure to market volatility risk.
Unlike the rigid whole life insurance, IULs offer flexibility. You can adjust your premiums and death benefit as your life and financial situation change over time.
Many IULs offer riders that allow you to access part of your death benefit early if you’re diagnosed with a critical, chronic, or terminal illness. This can help cover medical costs or give you peace of mind during a difficult time.
UILs requires long-term commitment and a solid understanding of how it works. If you are looking for a blend of life insurance protection, cash value growth potential, and tax-free access to your money, it might be solution for your long-term financial goals.
Whether you are a young professional, or planning for retirement, an Indexed Universal Life policy can serve as both a safety-net and a smart financial tool.
| Indexed Universal Life | Traditional 401(K) |
| Principle Protection from Market Loss | Exposed to Market Loss |
| Indexed Growth | Market Volatility Variable |
| No Age Rules (Loan access at any age) | Age Rules (No access until age 59.5 or pay early withdrawal penalty) |
| Living Benefits | No Living Benefits |
| Death Benefit for Beneficiaries | No Death Benefit for Beneficiaries |
| Tax Free Retirement | Pay Taxes in Retirement |
| No Contribution Limits | Contribution limits |
Ready to learn more or see if a particular life insurance fits your situation or financial goals? Contact us to explore your options and get a personalized illustration.