Indexed Universal Life Insurance

Indexed Universal Life (IUL) insurance is a type of permanent life insurance that combines a death benefit with a cash value component. The cash value in an IUL policy can grow over time, based on the performance of a specific stock market index, such as the S&P 500. However, the policy does not directly invest in the stock market. Instead, it credits interest to the cash value based on the index's performance, typically subject to a cap and a floor. The cap limits the maximum interest rate credited, while the floor ensures a minimum interest rate, providing some protection against market downturns.

One of the key advantages of IUL insurance is its flexibility. Policyholders can adjust their premium payments and death benefits within certain limits, allowing them to adapt the policy to their changing financial needs. Additionally, the growth of the cash value is tax-deferred, meaning taxes are not paid on the gains as long as they remain within the policy. Upon the policyholder's death, the death benefit is generally paid out income tax-free to beneficiaries. This combination of life insurance protection and potential cash value growth makes IUL policies an attractive option for those seeking both financial security and growth potential.