Summerlin Benefits Consulting Q&AAnswer
Jan 23, 2024 - 06:39 AM
Indexed Universal Life (IUL) is a permanent life insurance policy that earns a cash value on the premiums you pay into it. The Cash Value earns interest based on specific market indices; one example of a market index that many IUL policies follow is the S&P 500. The cash accumulation value will earn interest and grow based on the performance of the market index you are following. In short, your cash value makes money when the index is increasing, but you do not lose money when the index decreases- you will have protection from risk and loss. The concept of using an IUL policy as a financial vehicle is that, when structured correctly, the cash value has the potential to achieve higher returns over time compared to a traditional universal life policy and can even out perform some indexed annuities. More importantly, the cash value grows in a tax-free environment, the cash value is not taxable when it's growing nor when you take withdrawals/loans against it. Most consumers like this approach, as it can provide them with a tax-free income source in retirement, protects their money from losses, and typically yields a much better average rate of return than cash savings account.
