An Indexed Universal Life (IUL) insurance policy is usually a fixed universal life (UL) policy whose interest is determined, at least in part, by the performance of a specified index of the market. Unlike traditional UL policies, the policy owner may receive zero interest for a single crediting period if the index performs poorly. However, with most designs, the premiums are protected and guaranteed to credit a minimum interest rate in the event the policy is surrendered. The owner of an IUL policy may experience better interest crediting than a traditional UL policy during periods when the market performs well. IUL policies do not directly participate in any stock or equity investments.
The 0% or 1% “floor” provided by an IUL policy ensures that during crediting periods where the index is negative, that no less than 0% or 1% interest is credited to the index strategy. However, monthly deductions continue to be taken from the account value, including a monthly policy fee, monthly expense charge, cost of insurance charge, and applicable rider charges, regardless of interest crediting.
The use of cash value life insurance to provide a tax-free resource for retirement, debt, or student loans assumes that there is first a need for the death benefit protection. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy's cash value in early years. Living benefits may be provided by riders, which are supplemental benefits that can be added to a life insurance policy and are not suitable unless you also have a need for life insurance. Riders are optional, may require additional premium and may not be available in all states or on all products. This is not a solicitation of any specific insurance policy.
