Indexed Universal Life Insurance
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What is an IUL?
An indexed universal life (IUL) insurance policy is an insurance policy that comes with many benefits. Yes, they provide a death benefit like any other life insurance product. However, policyholders may also earn a reasonable rate of return** on their max-funded IUL. This is because the product’s interest rate is based on an index (hence the term “indexed” universal life insurance.)
What is an IUL and How Does it Work?
An IUL policy is typically “max-funded.” This means that the total life insurance premium is paid upfront. This way, the insurance company keeps your money protected. The policy is linked to an index, but your money isn’t invested in the market directly. When the index is on an upward trend, your policy will grow in value, but when it’s on a downward trend, your money isn’t lost.
How do IULs Work
When you pay your full premium to fund an IUL, some of that money goes to paying for life insurance coverage. After that, minus fees, the rest of the money is your cash value. You may earn an interest rate on this money because it is linked to an index.
You may have the option to select more than one index. This spreads the potential rate of return, rather than just relying on the performance of one index. There’s a lot of flexibility when it comes to insurance products such as IULs in contrast to typical retirement accounts. Get in touch with us to learn more about these different options.
As is expected for life insurance, an IUL provides a tax benefit directly to your beneficiaries when you pass away. However, you can also take money from an IUL while you’re still alive as a source of income!
Benefits of an IUL as opposed to other sources of retirement income include:
- Tax laws function differently for an IUL (but be sure to consult a qualified tax advisor about this)
- There are no RMDs (required minimum distributions)
- Your value is not affected by the fluctuations of the stock market
- You can fund your policy all at once
- There is no contribution limit, which may be very helpful if you’ve already maxed out your retirement accounts
IULs come with a lot of different options, and you should get educated on all of them in order to truly consider if one is right for you. Contact us today! We can explain to you what an IUL is and if it might be the right fit for you.