Life Insurance
What Is An IUL?
Indexed Universal Life Insurance
Indexed universal life insurance, or IUL, is a type of universal life insurance that can offer:
- Financial security
- Flexible options
- Death benefit
With IULs, you have the potential to take advantage of stock market returns without the risks. Additionally, it builds up a tax-free death benefit for your beneficiaries. Instead of growing based on a fixed interest rate, it’s based on the performance of a market index, such as the S&P 500. In contrast to investing directly in an index fund, however, you won’t lose money if the market declines. This is because the principal is covered by a guarantee*, that protects it against losses. It pays interest based on the movement of the indices.
Types of Universal Life Insurance
Several types of universal life insurance are available. An inflation-adjusted fixed rate is one example. Another example is the variable rate. A variable rate is invested in the stock market so it carries more risk. Indexed universal life insurance offers some advantages over other universal life insurance policies An IUL might be a good option for those seeking flexible insurance that offers higher growth potential than universal life. Also, they can provide some of the upside potentials of the stock market without the risks. For instance, the principle of an IUL is guaranteed* while the interest rate is determined by market conditions. So, it can be an advantageous combination. The team at GPS Retirement can help you explore options based on your specific needs.
Overview of How Indexed Universal Life Insurance Works
Premiums cover a portion of the cost based on the life expectancy of the insured. Cash value is added to the rest. Your money may also earn an interest rate based on an index. The cash value is credited with interest based on index increases. And, no direct investment is made into the stock market. Some policies allow you to select more than one index instead of just one. This offers you greater flexibility when choosing your IUL.
You can allocate your money in several ways. Certain policies earn a fixed interest rate, while others fluctuate according to an index. This cash may also earn interest based on the index. In addition, you can earn interest on the third part of your money if you decided to put your money in another index. There are several options for planning your retirement. Connect with us to learn about IULs and how they might suit your needs.
IUL Benefits for Life
Indexed life insurance can benefit your retirement strategy in a number of ways.
Insurance companies protect your money against loss. You can also tie your return rate to a stock index. IULs are linked to an index but they are not directly invested in them. Therefore, if the market falls, you won’t lose money. So, you can generate** a good return on your IUL cash value. It provides protection regardless of market conditions.
An IUL is an insurance product rather than an investment, so they may have more flexibility. Traditional retirement accounts and IULs follow different tax laws. And, IUL policies don’t have annual contribution limits like 401(k)s or IRAs. Further, you can withdraw an IUL policy for its cash value at any time, with no penalty. Another benefit is that they don’t require minimum distributions (RMDs) at 72.
As another advantage, you can finance your policy by paying overtime or by taking a lump sum. The cash value can also be used as income without paying taxes. Distributions from IULs are also tax-free. As another benefit, you can access your death benefit while still alive and use it to pay for long-term care tax-free if needed.
After you pass away, your family may inherit some of your wealth. The death benefit may increase over time depending on how the index performs. Beneficiaries usually receive more than initial contributions And, they are entitled to permanent, nontaxable benefits that don’t go through probate.
Connect with us to discuss if indexed life insurance is right for you.
