With indexed universal life, there is no single price tag. You choose a premium within a range, and how much you pay shapes how the policy performs. Here is how to think about the cost of a $500,000 policy.
IUL is life insurance, not an investment
First things first: an IUL policy's job is to pay a death benefit. Part of each premium covers the cost of insurance and policy charges; the rest can build cash value. It is not a retirement account and returns are never guaranteed.
Minimum versus target versus maximum premiums
- Minimum — the least you can pay to keep coverage in force, with little or no cash value growth.
- Target — the amount the insurer suggests to keep the policy healthy over the long run.
- Maximum — the most you can pay under tax rules while keeping the policy's advantages.
What shapes the cost
Your age, health class, and gender set the underlying cost of insurance. Charges generally rise as you age, which is why consistent funding matters — underfunding a policy for years can cause it to lapse.
Questions to ask before buying
- What premium keeps this policy in force to my target age, under conservative assumptions?
- What are the monthly charges, and how do they change?
- What is the cap and participation rate on the indexed accounts?
- Can I see an illustration run at lower-than-current rates?
The bottom line
The right premium for a $500,000 IUL is the one you can sustain for decades, not the lowest number on the page. Ask for conservative illustrations and review the policy every year.
Learn about IULThis article is for educational purposes only and is not tax, legal, or investment advice. Insurance and annuity products are not deposits, not FDIC insured, and not guaranteed by any bank. Guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurer. Product features vary by insurer and state.
