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What Is Indexed Universal Life Insurance?
What Is Indexed Universal Life Insurance?
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What is indexed universal life insurance?
Indexed universal life (IUL) insurance is permanent, which means it lasts your entire life and builds cash value. An IUL policy allows for some cash value growth through an equity index account, unlike other universal policies that only grow cash value through non-equity earned rates. Like with all universal life policies, once you've built up enough cash value, you can use it to lower or potentially fully pay for your premium without lowering your death benefit.
What is indexed universal life insurance?
Indexed universal life (IUL) insurance is permanent, which means it lasts your entire life and builds cash value. An IUL policy allows for some cash value growth through an equity index account, unlike other universal policies that only grow cash value through non-equity earned rates. Like with all universal life policies, once you've built up enough cash value, you can use it to lower or potentially fully pay for your premium without lowering your death benefit.
How do Indexed Universal Life Insurance Policies work?
One of the benefits to this type of policy in addition to the death benefit, is its potential to build cash value. You can take cash value from your policy to use for anything you choose via policy loans and withdrawals. Interest is credited based on a fixed rate or how indexed accounts perform. While not directly invested in the stock market, the interest credited to an indexed account is based on the performance of the index.
Each indexed account includes a minimum crediting rate of 0% (the floor) that protects you from market-based loss; it may also include a maximum crediting rate that would limit growth as well (the cap).
How do Indexed Universal Life Insurance Policies work?
One of the benefits to this type of policy in addition to the death benefit, is its potential to build cash value. You can take cash value from your policy to use for anything you choose via policy loans and withdrawals. Interest is credited based on a fixed rate or how indexed accounts perform. While not directly invested in the stock market, the interest credited to an indexed account is based on the performance of the index.
Each indexed account includes a minimum crediting rate of 0% (the floor) that protects you from market-based loss; it may also include a maximum crediting rate that would limit growth as well (the cap).
How cash value grows in an indexed UL policy
First of all, you have to choose how you want your cash account to be allocated for growth. Each insurance company has its own selection of indices available and you may be able to choose more than one. You may also be able to allocate a portion to a fixed-rate interest account.
The cap is usually max credit for a specified segment of index participation. Most policies have annual caps, but some policies may have monthly caps. Caps can change at the end of any segment.
Additionally, performance can be impacted by a participation rate set as a percentage of the index’s gain, which is called the “participation rate.” For example, if the reference index rises 10%, and the policy’s participation rate is 50%, the amount allocated to the index would grow by 5%. Most IUL’s have a participation rate set at 100%, but that can also change.
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Tax Advantages
Like all life insurance, your beneficiaries will receive the death benefit typically free of federal income tax, and growth within the policy is tax-deferred.
Cash Value Growth Potential
You also have the potential to build cash value (“living benefits”) with a portion of your monthly premiums earning interest based on either a fixed rate or on the performance of the indexed accounts.
Flexible Premium Payments
You decide when (monthly, quarterly, bi-annually, annually) and how much to pay (provided you meet certain minimums).
How cash value grows in an indexed UL policy
First of all, you have to choose how you want your cash account to be allocated for growth. Each insurance company has its own selection of indices available and you may be able to choose more than one. You may also be able to allocate a portion to a fixed-rate interest account.
The cap is usually max credit for a specified segment of index participation. Most policies have annual caps, but some policies may have monthly caps. Caps can change at the end of any segment.
Additionally, performance can be impacted by a participation rate set as a percentage of the index’s gain, which is called the “participation rate.” For example, if the reference index rises 10%, and the policy’s participation rate is 50%, the amount allocated to the index would grow by 5%. Most IUL’s have a participation rate set at 100%, but that can also change.
Tax Advantages
Like all life insurance, your beneficiaries will receive the death benefit typically free of federal income tax, and growth within the policy is tax-deferred.
Cash Value Growth Potential
You also have the potential to build cash value (“living benefits”) with a portion of your monthly premiums earning interest based on either a fixed rate or on the performance of the indexed accounts.
Flexible Premium Payments
You decide when (monthly, quarterly, bi-annually, annually) and how much to pay (provided you meet certain minimums).
Testimonials
"Mauricio provided us with a mortgage protection plan where we get all our money back and also a policy for my mother for final expenses."
- The Wallaces'
"Mauricio made this easy for us. We appreciate you sending us the handwritten note and hotel savings card."
- The O'Brien's
"My work coverage was let go during the pandemic. Being able to protect my own family has been an amazing blessing.
-The Carters'
Testimonials
"Mauricio provided us with a mortgage protection plan where we get all our money back and also a policy for my mother for final expenses."
- The Wallaces'
"Mauricio made this easy for us. We appreciate you sending us the handwritten note and hotel savings card."
- The O'Brien's
"My work coverage was let go during the pandemic. Being able to protect my own family has been an amazing blessing.
-The Carters'
Mauricio Yepes
MY Insurance Services
National Producer Number: 19998775
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Mauricio Yepes
MY Insurance Services
National Producer Number: 19998775
Licensed States: Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming
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