Indexed universal life, or IUL, is permanent life insurance. Its first job is to pay a death benefit to the people you love. It can also build cash value over time. Here is what that means in practice.
It is life insurance first
IUL is not an investment and not a retirement account. Part of each premium pays the cost of insurance and policy charges; the rest can go toward cash value.
How cash value can grow
Cash value earns interest based partly on a market index, subject to caps and participation rates. Many policies include a floor, often 0%, so index losses do not reduce credited interest — but policy charges are still deducted every month.
Flexible, with responsibility
You can often adjust premium payments within limits. Paying too little, or charges rising with age, can cause the policy to lapse if cash value runs out.
Accessing cash value
You may be able to borrow against cash value or make withdrawals. Loans and withdrawals reduce the death benefit and cash value, accrue interest, and can cause a lapse with possible tax consequences.
Who may consider it
People who need lifelong coverage, can fund a policy consistently for many years, and value flexibility may look at IUL.
The bottom line
IUL offers lifelong protection with flexible premiums and cash value potential, but it requires steady funding and regular reviews. It is never a guaranteed investment.
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.
