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Index Universal Life

Index Universal Life Insurance is one of three types of Universal Life. This type of policy is made up of two components; a cash value component and a life insurance component. Premiums in this type of insurance can be modified throughout the life of the policy. The cash value component grows in relationship to an index or more than one index, depending on the asset allocation. Index Universal Life has the ability to participate in the stock market gains, but does not participate on market downsides (losses, or no gains). It is marketed as a product that guarantees that those who purchase it will not lose any money. The cash in the cash value account is accessible at any time and if done right, can be completely tax free. The cash in the cash value account can be used to supplement one’s retirement income during retirement years. If done properly, it can be tax free.


Many professionals describe Index Universal Life (IUL) as permanent insurance, but it is not. The life insurance component of an IUL is annual renewable term, and it is the most expensive type of term life that can be bought. IUL’s cost of insurance increases each year with age. The concept of the IUL is that the cash value will grow substantially to cover the rising costs of the insurance component and that there will be enough left over to use during retirement.


Before you buy an IUL, study our series on soon to be published blog.

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