INDEXED UNIVERSAL LIFE
1. INDEXED UNIVERSAL LIFE 101
Indexed universal life (IUL) insurance policies put a portion of the policyholder’s premium payments toward annual renewable term insurance with the remainder added to the cash value of the policy after fees are deducted. On a monthly or annual basis, the cash value is credited with interest based on increases in an equity index. The gains are applied based on a participation rate that’s set by the insurance company, which can be anywhere from 25% to more than 100%.
2. KEY BENEFITS
Higher Return Potential: These policies leverage call options to gain upside exposure to equity indexes without the risk of losses, while whole life policies provide only a small interest rate that may not even be guaranteed.
Greater Flexibility: Policyholders can decide how much risk they’d like to take in the market, adjust death benefit amounts as needed, and choose among a number of riders that make the policy customizable to their needs.
Tax-Free Capital Gains: Policyholders do not pay capital gains on the increase in cash value over time unless they abandon the policy before it matures, whereas other types of financial accounts may tax capital gains upon withdrawal.
3. SPEAK TO A LICENSED INSURANCE AGENT