Here’s what you need to know about IUL, Indexed Universal Life insurance.
- Strong IUL sales in 2018
“After three consecutive quarters of declines, individual life insurance sales growth rebounded in the second quarter of 2018,” said Ashley Durham, associate research director, LIMRA Insurance Research. “Indexed universal life drove the comeback with a 15 percent increase over second quarter of 2017.”1
- IULs are not for everyone
People who are not in good health may not qualify for IUL; underwriting is required.
- Look for uncapped policies
At Shurwest, we provide due-diligence support for our advisor partners, including considering uncapped policies from the large universe of products we offer.
- Premiums can be low
The premiums may be low if the cash value of the policy will cover most of the death benefit (and thus the risk is lower for the insurance carrier.) Per Investopedia, “When a premium is paid, a portion pays for annual renewable term insurance based on the life of the insured. Any fees are paid, and the rest is added to the cash value.”2
- An IUL is not directly invested in the stock market
Unlike variable policies, an IUL’s “total amount of cash value is credited with interest based on increases in an equity index (but it is not directly invested in the stock market).”2 Therefore its risk is tied to the strength of the insurance carrier’s ability to pay claims.
- IULs offer a variety of indexes
“[IUL] policies offer a variety of well-known indexes such as the S&P 500 or the Nasdaq 100, and usually offer a guaranteed minimum fixed interest rate option as well as a choice of indexes.”2
- Different policies credit gains differently
It’s important to understand the calculations behind various IUL policies, and Shurwest helps with this.
“The gains from the index are credited to the policy based on a percentage rate, referred to as the participation rate. Some policies calculate the index gains as the sum of the changes for the period; other policies take an average of the daily gains for a month. IUL policies typically credit the index interest to cash accumulations either once a year or once every five years.”2
- Downside protection from index losses
If the index goes down instead of up, no interest is credited to the cash account (and nothing is taken out either).
- Unlimited policy amounts
An IUL is sometimes called a “rich man’s Roth” by industry insiders because there are no income limits placed on the people who purchase them, nor is there a limit on the amount of insurance they can purchase. However, to keep many of the positive impacts of IUL’s in place, the policy must not be classified as a MEC (Modified Endowment Contract).
- Permanent death benefit
The death benefit is permanent, and like any life insurance benefit, usually goes to the beneficiary tax and probate free.
Find out more about Indexed Universal Life policies. Call Shurwest at 800.440.1088.