Transamerica first pioneered IUL in 1997. This product was used to replace Variable Universal Life insurance(VUL). IUL is considered one of the permanent policies which are primarily sold by non-mutual companies (publicly traded insurance companies).
In IUL premiums are due forever regardless of what the illustration or the agent says. Because it is a form of universal life insurance, the cost of insurance (mortality expenses) and admin expenses are due forever. So if you don’t make any premium payments after a certain age, the cost will be taken out of your cash value as a loan.
Index universal life (IUL) insurance includes the premium flexibility and adjustable death benefit that typical UL coverage provides. Plus, IUL can provide the potential for greater policy value growth than UL, with less risk to you than a Variable Universal Life policy. Indexed Universal Life Insurance allows the owner to allocate cash value amounts to either a fixed account or an equity index account. IUL policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit
IUL policies link the growth of policy value to the percentage change of one or more widely-followed financial market indices such as the S&P 500® Index, Nasdaq-100®, or Dow Jones Industrial Average. As a rule, IUL policies also include a fixed-rate interest crediting option.
IUL provides death benefit protection and the benefit of cash value based in part on the increase of market indexes. Even if these indexes dip, you’re still safe with the guaranteed minimum interest rate. Indexed policies allow policyholders to decide the percentage of their funds that they wish to allocate to fixed and indexed portions. Also, these types of universal insurance policies typically guarantee the principal amount in the indexed portion but cap the maximum return that a policyholder can receive in said account.
Indexed universal life insurance puts a portion of the premium payments toward annual renewable term insurance with the remainder added to the cash value of the policy after fees are deducted. On a monthly or annual basis, the cash value is credited with interest based on increases in an equity index.
In our professional opinion, it is a very complicated product in which the insured (you as a policy owner is taking all the risk). Please call us to learn more about IUL’s. We will be happy to educate about the pros and cons of owning this product.
Benefits of Index universal life insurance
- Higher market earnings.
- Tax Advantages.
- No limit on premium payment.