Indexed universal life (IUL) insurance is a policy that allows the owner to allocate cash value amounts of the policy to either a fixed account or an equity index account. IULs offer access to indexes such as the S&P 500 or the Nasdaq 100.
These policies offer tax-deferred cash accumulation for retirement in addition to having a death benefit.
How indexed universal life insurance works
While you are paying for your life insurance policy, a portion of your premium is for your renewable life insurance policy and the rest goes into the cash value of the policy.
Your cash value then earns interest based on increases in an equity index. Some policies allow you to select multiple indexes.
How your policy calculates the index gains will vary from company to company.
Some policies calculate the index gains as the sum of the changes. Other policies take an average of the daily gains for the month.
However, if the index goes down, no interest is credited to the cash account. Your policy will never lose cash value as there is always a floor of at least 0%.
If you need a better explanation, we have a DVD we can make available to you showing the special benefits of the IUL contract.
This DVD is very informative and will show the potential of tax-free income and other benefits of these policies.
"We work for YOU not the insurance companies"
Cash value grows untaxed
The cash value in your indexed universal life insurance policy will grow tax-deferred.
Also, unless there is some restriction imposed by the insurance company offering your policy, there is no limit to the amount you can contribute to an IUL. You can also withdraw the money at any time without penalties. IRAs and 401ks both have contribution limits and require you to be a certain age before you can withdraw your money.
Indexed universal life insurance is flexible
You can select the amount of risk. You can also adjust premium payments.
Should you need to, you can use the cash value to pay your premiums.
This type of life insurance is both a savings and retirement vehicle as well as a way to pass money along to your surviving family.