07
Jul-22
IUL insurance is often pitched as a cash value insurance policy that benefits from the market’s gains tax-free—without the risk of loss during a market downturn.
When you purchase an IUL insurance policy, you’re getting permanent coverage as long as premiums are paid. Your policy includes a death benefit, which is paid out to your named beneficiary or beneficiaries when you pass away. But the policy can also increase in value during your lifetime through a cash value component.
The cash value portion of your policy earns interest based on the performance of an underlying stock market index. For example, returns may be linked to the Standard & Poor’s (S&P) 500 composite price index, which tracks the movements of the 500 largest U.S. companies by market capitalization. As the index moves up or down, so does the rate of return on the cash value component of your policy.
The insurance company that issues the policy may offer a minimum guaranteed rate of return. There may also be an upper limit or rate cap on returns.
IUL insurance is riskier than fixed universal life insurance policies, which offer a guaranteed rate of return. But it’s less risky than variable universal life insurance, which allows you to invest money directly in mutual funds or other securities.
source: https://www.investopedia.com/articles/personal-finance/012416/pros-and-cons-indexed-universal-life-insurance.asp