What Is An IUL?
Protect Your Wealth
What Is An IUL?
What is an IUL? An IUL is an insurance policy type. It stands for “Indexed Universal Life” insurance. All life insurance, of course, provides a death benefit. An IUL does provide this benefit, but being “universal” life insurance, it may also offer more benefits. For example, policy owners have the possibility of a reasonable rate of return** with an IUL, Additionally, an IUL has advantages even over other universal life policies. You may be able to protect your cash value, yet still receive tax-free* income.
An IUL may be a valuable part of an overall financial strategy. With an IUL, your money is being kept safe in a reserve by the insurance company. In the event of economic turmoil, such as a stock market drop, your money is kept safe even still.
How Does it Work?
Basically, when funding an IUL, some of your money ways for life insurance coverage. The rest of it, minus fees, is the cash value. It is possible for this cash value to get a reasonable rate of return** because it links to a particular index. Although the performance of the index is based on the market, your money isn’t directly invested into it. For example, your earnings may be based on the performance of the S&P 500 index. If the S&P 500 goes up, you may receive an increase in your rate. However, when the index is down, the cash value of your IUL remains the same.
What about your choices?
As it turns out, you may have quite a few options available to you. It’s possible to diversify the money in your IUL by selecting a variety of indexes. Some of your cash value might be earning a fixed interest. Another portion could be in one index, and yet another part of the cash value could be in another.
IUL Benefits During Your Lifetime
Beyond just a death benefit, IUL may help retirees in other ways. First, you may have flexibility with an IUL that isn’t normally available with other options. Keep in mind, an IUL is a product that an insurance company provides. Because your money isn’t invested in the stock market, the laws surrounding are different than they are with traditional retirement accounts. 40(k)s and IRA have contribution limits, while IULs don’t. Furthermore, those retirement accounts may have fees for early withdrawal, but an IUL doesn’t have this restriction.
IULs are also fairly conservative financial products.
Even when the market is down, your cash value remains unaffected. When your IUL index rises, you’ll see an increase in returns, but when the index drops down, there is no dip in your cash value. For some retirees looking for more peace of mind and confidence, this might be worth considering. this is especially true for those who find the stock market unpredictable and are somehow afraid of relying on it.
Have a lump sum of money?
You can fund an IUL with it! Or, you may choose to fund your IUL over time. When you access the money in it, you do so without an income tax. Additionally, any growth that may have occurred to your cash value is tax-free.* Some people lock in their potential gains every year with it, yet like the idea of being able to take out money when they need it. Because all of these options exist, be sure to contact us so we can talk about your specific goals, needs, and overall strategy.
IULs may also help retirees protect their wealth after they are gone, and get it to their beneficiaries free of probate. Beneficiaries are usually in receipt of an amount higher than your initial contribution. Additionally, it’s possible for the death benefit to increase over time. And, no probate court is required with an IUL, because it is an insurance company. Your beneficiary or beneficiaries get the death benefit tax-free.*