What is Indexed Universal Life insurance?

Life insurance can seem like a tricky topic, but it’s something that can help you and your family when life changes. One type of life insurance you might hear about is Indexed Universal Life (IUL) insurance. Let’s break it down in a way that makes sense, even if you’re just learning about it!

What Is Indexed Universal Life Insurance?

Indexed Universal Life (IUL) insurance is a specific kind of life insurance that gives you both a death benefit (money paid to your loved ones when you pass away) and the chance to grow cash value over time. This growth happens through something called an “index,” which is a way of measuring how the stock market does.

With IUL, the money in your policy can grow based on how well the stock market is doing, but there’s a safety net. Even if the market goes down, your money won’t lose value. That means your money has the potential to grow but without the big risk of losing it all.

How Does Indexed Universal Life Insurance Work?

Think of your IUL policy like a savings account that grows based on a pre-determined “index” that tracks how the stock market performs. The money you put into your IUL is used to pay for your life insurance — and also to grow your cash value. Over time, the value of your IUL can increase, but it’s not tied exactly to the ups and downs of the stock market. Instead, the insurance company sets rules for how much of the market’s growth will count toward your account. These rules also help protect your policy’s value from downturns.

Types of Indexed Universal Life Insurance

There are two types of Indexed Universal Life insurance: Simplified and Fully Underwritten. Let’s look at each one.

Simplified Indexed Universal Life Insurance

Simplified IUL has a simpler application process than Fully Underwritten policies. It doesn’t require as much paperwork and typically does not need a medical evaluation. This makes it a good choice for people who don’t want to deal with a long application process or who may have health issues.

Attributes of Simplified IUL:

• Quick and Easy Application: No need for medical examination.
• Easier to Get Approved: If you’re in good health but don’t want to go through a long medical exam, this might be the right option for you.
• Limited Coverage: Sometimes, the death benefit or the amount of money you can get from the policy might be a little smaller.

When to Consider Simplified IUL

• You’d like to start your life insurance policy soon.
• You would prefer to not have detailed medical exams or tests.
• You are looking for a more straightforward, low-maintenance option.

Fully Underwritten Indexed Universal Life Insurance

Fully Underwritten IUL is the more traditional option. It involves a more detailed application process, which usually includes a medical exam and a health history check. Because of this, the insurance company can offer larger amounts of coverage and better rates if you’re in good health.

Attributes of Fully Underwritten IUL:

• Detailed Medical Exam: The insurance company wants to know about your health, so there are more steps before you get approved.
• Larger Coverage: If you’re in good health, you might be able to get a higher death benefit and more flexibility in your policy.
• Comprehensive Benefits: Sometimes this option has more features and benefits that can be customized.

When to Consider Fully Underwritten IUL

• You’re in good health and want more coverage.
• You are comfortable with the medical exam process.
• You prefer more options to customize your life insurance.

What are the Benefits of Indexed Universal Life Insurance?

Both types of Indexed Universal Life insurance have benefits worth considering:

• Flexible Premiums: You can adjust how much you pay based on your life situation.
• Cash Value Growth: Your money can grow based on market performance, which might give you a better return than a regular savings account.
• Life Insurance Coverage: If something happens to you, your family will get a death benefit.
• Tax-Deferred Growth: The money in your policy grows without being taxed, which can help you save more in the long run.

What Kind of IUL Should You Consider?

Choosing the right life insurance is a personal decision. Here’s who might benefit from each type of IUL:

• Simplified IUL is a good choice if you want life insurance quickly and without the hassle of a lot of paperwork. It’s great for people who don’t want to go through a long process, or for those who may have health issues that make getting life insurance harder.
• Fully Underwritten IUL is best for people who are in good health and can go through the extra steps, like medical exams, to get the best coverage and rates. If you need a larger death benefit or more options for customizing your policy, this might be the right choice for you.

Final Thoughts

Indexed Universal Life insurance can be a great way to protect your family and save for the future, all while having flexibility and safety. Whether you go with Simplified IUL or Fully Underwritten IUL — or another type of life insurance — depends on your health, your financial goals, and how much time you want to spend getting life insurance.

Want to know more? Reach out to one of our licensed agents to find out if Indexed Universal Life is right for your unique stage of life.

This is a solicitation of Indexed Universal Life Insurance (IUL). A licensed agent/producer may contact you. Coverage, products, and features may not be available in all states, may vary by state, and will vary by policy. Your rate and availability for this product will be subject to underwriting. An IUL life insurance policy cash value earns interest based on the performance of an index but isn’t directly invested in the stock market. IUL policies can have an interest crediting floor, which is typically 0%. The cash value can decline even with a floor due to premiums and other costs. IUL policies contain specific limitations, exclusions, termination provisions, and requirements for keeping them in force. Please see your policy or contact the insurance company for full details. Approval is based on your answers to the questions on the application and information obtained from other sources. Life insurance is not a bank deposit, is not federally insured, may involve risk, and may lose value. All guarantees are subject to the financial strength and claims-paying ability of the issuing life insurance company.

Reducing or skipping premium payments will impact the amount of interest paid and may impact how long the policy lasts. Accessing the cash value of a policy will reduce the available cash surrender value and the death benefit. Any loans from a policy’s cash value are subject to interest and the balance is deducted from your death benefit. A policy owner does not have the ability to make unlimited payments into the policy. If too much money is paid into the policy, it will become a Modified Endowment Contract (MEC) and withdrawals and loans will be taxable.
The death benefit generally will not be paid if the insured’s death results from suicide, while sane or insane, within the contestability period. Instead, the benefit will pay the sum of the premiums paid since issue, less any loan and loan interest due and any withdrawals. Exclusions and limitations may vary by state and will vary by policy.