IUL Policies: Growth & Protection

FAST FACT: IULs usually offer a guaranteed minimum fixed interest rate and a choice of benchmark equity indexes to track.

KEY TAKEAWAYS

• Indexed universal life (IUL) insurance lets the policyholder decide how much cash value to assign to a fixed-rate account and an equity-indexed account.
• Indexed universal life is a form of permanent life insurance and like universal life, it allows for flexible premiums and possibly a flexible death benefit.
• IUL insurance policies can track a number of well-known equity indexes, such as the S&P 500 or the Nasdaq-100 to earn interest credits.
• IUL policies usually cap your returns but also guarantee a minimum interest rate.

How Does Indexed Universal Life (IUL) Insurance Work?

As with universal life insurance, IUL policies have adjustable premiums. You can underpay or skip premiums, and you may be able to adjust your death benefit as well. What makes IUL different is the way the cash value is invested.

When you take out an indexed universal life insurance policy, the insurance company will help you select the index to use for all or part of the cash value account segment of your policy and your death benefit. When a premium is paid on the account, a portion pays the cost of insurance based on the insured’s life. Any fees are paid, and the rest is added to the cash value.

The total cash value is credited with interest based on increases in an equity index (but isn’t directly invested in the stock market). If you own an indexed universal life policy, you can likely borrow against the cash value accumulated in the policy. However, if you don’t pay back your loans, they are deducted from the death benefit.

Key Features

IUL insurance offers these main features, among others:

• Permanent, lifelong coverage when premiums are kept up to date.
• Flexible premiums, and possibly a flexible death benefit.
• Cash value, along with potential growth of that value through an equity index account.
• Cash value can be partially allocated to a fixed interest option.
• Minimum interest rate guaranteed, but there may also be a cap on gains, typically around 8%-12%.
• Cash value built up can be used to lower or potentially cover premiums without subtracting from your death benefit.

Some policies may allow the policyholder to select multiple indexes.

Policyholders can decide the percentage allocated to the fixed and indexed accounts. The selected index value is recorded at the beginning of the month and compared with the value at the end of the month. If the index increases during the month, the interest is added to the cash value. The index gains are credited back to the policy, either on a monthly or an annual basis.

People who need permanent life insurance protection but wish to take advantage of possible cash accumulation via an equity index might use IULs as key person insurance for business owners, premium-financing plans, or estate-planning vehicles.

Example of Indexed Universal Life Insurance

Let’s say your selected index for your IUL policy gained 6% from the beginning of June to the end of June. The 6% is multiplied by the cash value. The resulting interest is added to the cash value. Some policies calculate the index gains as the sum of the changes for the period, while other policies take an average of the daily gains for a month. No interest is credited to the cash account if the index goes down instead of up.

The gains from the index are credited to the policy based on a percentage rate, referred to as the “participation rate.” The rate is set by the insurance company and can be anywhere from 25% to more than 100%. For example, if the gain is 6%, the participation rate is 50%, and the current cash value total is $10,000, $300 is added to the cash value (6% x 50% x $10,000 = $300).

Advantages of IUL Insurance

• Flexible premiums: As with standard universal life insurance, the policyholder can increase their premiums or lower them in times of hardship.

• Cash value accumulation: Amounts credited to the cash value grow tax-deferred. The cash value can pay the insurance premiums, allowing the policyholder to reduce or stop making out-of-pocket premium payments.
• Investment flexibility: The policyholder controls the amount risked in equity-indexed accounts, and the death benefit amounts can be adjusted as needed. Most IUL insurance policies offer a host of optional riders, from death benefit guarantees to no-lapse guarantees.
• Death benefit: This benefit is permanent, not subject to income or death taxes, and not required to go through probate.
• Less risk: The policy is not directly invested in the stock market, thus reducing risk.
• Easier distribution: The cash value in IUL insurance policies can be accessed at any time without penalty, regardless of a person’s age.
• Unlimited contribution: IUL insurance policies have no limitations on annual contributions.

Is Indexed Universal Life Insurance (IUL) a Good Investment?

An IUL can be a good way to save up money in a cash value account that, connected to a market index, may earn modest returns, but it is first and foremost a life insurance policy, not an investment vehicle.

Can You Lose Money in an Indexed Universal Life Insurance Policy (IUL)?

It is unlikely you will lose money in an IUL because insurance providers set a guarantee for your principal to protect it against losses in the market. However, there also is often a cap on the maximum amount you can earn.

Why WealthX IUL Stands Out as Your Top Choice

At the Policy Shop, we’re passionate about guiding you towards the best financial solutions. When it comes to securing your future, WealthX Indexed Universal Life (IUL) insurance emerges as the clear winner. Let’s delve into why WealthX IUL is your optimal option:

WealthX IUL: The Ultimate Financial Strategy

WealthX IUL insurance combines the benefits of permanent life insurance with unparalleled wealth-building potential. With a cash value component and a death benefit, this policy empowers you to grow your assets while safeguarding your loved ones’ financial security.

Unlocking Growth Potential

The cash value in WealthX IUL policies earns interest by tracking a carefully selected equity index. Unlike traditional whole life insurance, WealthX IUL offers flexibility and growth potential, allowing you to maximize your returns in a tax-advantaged manner.

Tailored for Your Success

While some policies cap your accumulation potential, WealthX IUL sets itself apart by offering robust growth opportunities with no such limitations. This means you can achieve your financial goals without constraints, making WealthX IUL the ideal choice for ambitious individuals like yourself.

A Smarter Retirement Solution

While IUL policies may not be the optimum retirement savings vehicle for everyone, WealthX IUL stands out as a superior option for high-net-worth individuals. By minimizing taxable income and maximizing growth potential, WealthX IUL paves the way for a financially secure retirement.

Expert Guidance Every Step of the Way

At the Policy Shop, we understand that every individual’s financial journey is unique. That’s why our team of experts is here to provide personalized advice and support tailored to your specific needs and goals. With WealthX IUL, you’re not just investing in a policy – you’re investing in your future.

Conclusion

When it comes to securing your financial future, WealthX Indexed Universal Life insurance is the clear choice. With its unparalleled growth potential, tax advantages, and tailored solutions, WealthX IUL empowers you to build wealth and protect your loved ones’ financial well-being. Choose WealthX IUL and embark on a path towards financial freedom today.