Travis has been a husband and father for over 15 years. Served in the Army National Guard for 10 years. Currently a life insurance agent.
What Is an IUL?
An IUL is an Indexed Universal Life insurance policy. There are many pros and cons of having one. Premiums are typically a little higher than for a Term Life policy but lower than for a traditional Whole Life policy. It is basically a little bit of both, a Whole Life policy and a Term Life policy. Premiums are based on the death benefit, health conditions, age, and gender of the client at the time of purchase.
What Are the Benefits of an IUL?
Most IUL’s have living benefits. Meaning, if you are ever diagnosed with a chronic, terminal, or critical illness or condition, you draw usually up to 70% to 80% of the death benefit to pay for medical expenses. Depending on the insurance carrier, the client may be charged a fee and may have to wait a certain period of time, (waiting period), before claiming this benefit.
Most IUL’s accrue a cash value usually after two years. The cash value percentage is usually based on the amount of the premium being invested into the insurance carrier’s designated investments. An IUL can be added a client’s investment portfolio. The client can borrow against the cash value. If the client has had the policy for an average of about twenty years or so, the cash benefit should be enough for the client to draw from during their retirement years, as long as the premiums are still being paid and the client doesn’t deplete the cash value.
Most IUL’s will remain in effect for the entire lifetime of the client. When the policy is written, a maturity date or expiration date will be written within the policy. Depending on the client’s needs and the carrier, the expiration date will be the client’s future age. Typically, an expiration date will fall on the client’s birthday of ages; 80, 95 or even 120 years old. If the client manages to out live the policies maturity date, the policy will no longer be in effect and the client will be out of coverage.
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The cash value of an IUL can pay for premiums if the client falls into a hardship. As long as there is enough cash value built up in the policy. But, once the cash value is depleted, the policy will no longer be in effect.
An IUL can be cashed out. But, please note, most carriers will charge surrender fees. Some surrender fees could be in the form of a certain amount per thousand of the cash value. And the client will have to pay taxes on the cash value.
How Does an IUL Work?
The premium is divided into two parts. The first part of the premium pays for the cost of insurance to keep the policy in effect. The second part is invested into the carrier’s designated index investments. The gains from the investments are primarily dependent on the economy and how strong the equity index market is. If the market is down, there will not be any cash accumulation.
It is not the intention of this article to promote or sell a particular product or to endorse a particular insurance carrier. If a reader has any questions regarding the content of this article or would like further information regarding an IUL, please contact a local insurance agency or agent.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2018 Travis Helmboldt