Indexed Universal Life Insurance Explained
Flexible life insurance with lifelong coverage and the potential to build cash value linked to market indexes — without direct market risk.
What Is Indexed Universal Life Insurance (IUL)?
Indexed Universal Life (IUL) is a type of permanent life insurance that provides lifelong coverage and a cash value component that can grow based on the performance of a market index, such as the S&P 500. Unlike investing directly in the market, IUL policies typically include downside protection to help limit losses during market declines.
Lifelong Coverage
IUL provides permanent life insurance protection that can remain in force for your lifetime when properly funded.
Cash Value Growth Potential
Cash value growth is linked to market index performance, offering potential upside while avoiding direct market exposure.
Downside Protection
Most IUL policies include a floor that helps protect your cash value from market losses during negative years.
Flexible Premiums
Premium payments are flexible, allowing you to adjust contributions over time based on your financial situation and goals.
Why Indexed Universal Life Insurance May Make Sense
IUL is designed for long-term planning and flexibility. It’s often considered by individuals looking for permanent coverage with additional cash value potential.
Flexible Pay-to-Age Options
Some permanent life insurance policies allow you to choose how long premiums are paid, such as to age 90, 95, 100, or other maturity ages. This flexibility helps align coverage with long-term planning goals.
Growth Potential With Protection
Cash value growth is linked to the performance of a market index, such as the S&P 500. Most IUL policies include a floor that helps protect against market losses, even during down years.
Flexible Premium Options
IUL policies offer flexible premiums, allowing you to adjust how much you contribute over time. This flexibility can be helpful as income, goals, or priorities change.
Tax-Advantaged Cash Value
Cash value inside an IUL policy grows tax-deferred and can be accessed through policy loans. Policy loans and withdrawals are subject to policy terms and may impact performance.
What Affects Indexed Universal Life Performance & Cost?
Indexed Universal Life insurance performance and costs depend on several factors. Understanding these helps set realistic expectations and supports informed planning decisions.
Market Index Performance
Cash value growth in an IUL policy is linked to the performance of a market index, such as the S&P 500. Positive index years may result in interest credits, while negative years typically do not reduce cash value due to built-in protection.
Policy Credit Methods
IUL policies use caps, participation rates, and floors to determine how much interest is credited. These features limit both potential gains and losses and vary by carrier and policy design.
How the Policy Is Funded
The amount and timing of premium contributions play a major role in long-term performance. IUL policies are designed for long-term funding rather than short-term strategies.
Insurance Costs & Fees
IUL policies include insurance charges, administrative fees, and cost of insurance expenses that change over time. These costs vary by age, health, and policy structure.
Indexed Universal Life insurance is not a direct investment in the stock market. Policy performance is subject to carrier terms and conditions.
How Indexed Universal Life Insurance Works
Indexed Universal Life combines permanent life insurance protection with cash value growth potential tied to a market index. Here’s a simple way to understand how it works.
Choose Coverage & Funding Strategy
You select a death benefit amount and determine how much you want to contribute to the policy. Premiums are flexible, allowing adjustments over time based on your goals and financial situation.
Cash Value Linked to a Market Index
The policy’s cash value can earn interest based on the performance of a market index, such as the S&P 500. Growth is subject to policy limits like caps and participation rates, while downside protection helps limit losses in negative years.
Access Benefits Over Time
Over time, the policy may build cash value that can be accessed through policy loans, subject to policy terms. At the same time, the policy provides lifelong death benefit protection for your beneficiaries.
Indexed Universal Life insurance is designed for long-term planning. Cash value growth is not guaranteed and depends on policy design and index performance.
Explore Indexed Universal Life Options
Indexed Universal Life insurance policies are customized based on coverage amount, funding strategy, and policy design. The tool below allows you to explore potential options and see illustrations based on different assumptions. Results are for educational purposes and are not guarantees.
This page focuses on Indexed Universal Life (IUL) coverage. The quote tool may display multiple permanent options. Illustrations are not guarantees and actual policy performance will vary.
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Trusted Carriers We Work With
We work with well-known, financially strong insurance companies that offer Indexed Universal Life options.
Carrier availability, policy features, and index options vary by state and underwriting guidelines. Bonanza Insurance Services is an independent agency and is not employed by any one insurance company.
Common Questions About Indexed Universal Life
Indexed Universal Life insurance is a type of permanent life insurance that provides lifelong coverage and includes a cash value component that may grow based on the performance of a market index. It also includes features designed to help limit downside risk.
No. Indexed Universal Life insurance is not a direct investment in the stock market. While interest credits may be linked to a market index, your money is not invested directly in the market.
No. Cash value growth in an IUL policy is not guaranteed. Growth depends on index performance, policy limits such as caps and participation rates, and overall policy design.
Most IUL policies include a floor that helps protect cash value from market losses during negative years. However, policy charges and loan activity can impact long-term values if not managed properly.
IUL policies typically offer flexible premiums. This means you may be able to adjust how much you contribute over time, subject to minimum funding requirements needed to keep the policy active.
Yes. Cash value may be accessed through policy loans or withdrawals, subject to policy terms. Loans may reduce the death benefit and impact policy performance if not managed carefully.
IUL may be suitable for individuals seeking permanent coverage with flexibility and long-term planning potential. It is generally designed for people with a long-term time horizon who understand that results are not guaranteed.
No. Viewing illustrations or estimates does not require any obligation. The tool is intended to help you explore options. A licensed agent is available if you’d like guidance.
Independent agencies are not tied to a single insurance company. This allows us to compare options from multiple carriers and help you choose coverage based on your goals rather than a single company’s product lineup.
Bonanza Insurance Services is an independent insurance agency that works with multiple nationally recognized carriers. Our role is to help individuals and families understand their options and choose coverage that fits their needs and long-term goals.
Explore Other Life Insurance Options
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