Indexed Universal Life: what it is, and why you should consider it

by | Nov 21, 2021 | Life Planning | 0 comments

What we do

Planning for the unexpected

Most people have heard of term and whole life insurance but are unfamiliar with indexed universal life insurance (IUL). Here are some key points about an IUL and why I often recommend them to my clients.

  • Like whole life, an IUL is a type of permanent life insurance.
  • Unlike whole life, policy expenses are fully disclosed.
  • A typical IUL policy is overfunded, meaning you pay more into the policy than is required with the goal of growing your money.
  • An IUL is funded with after-tax dollars. It is not a qualified plan, nor can qualified money be rolled into the policy.
  • An IUL is indexed to the market as opposed to being directly invested in the market; being indexed means options are purchased and only exercised when there would be a gain.
  • An IUL gives you the power to choose how your policy earns interest, either through fixed or indexing options or a combination of strategies.
  • An IUL provides you with the potential to be credited with earnings based in part on the gains of a market index.
  • Once your IUL has been credited with a gain, it is locked in; this resets the account balance and is the basis for future interest crediting.
  • An IUL protects you from potential stock market losses using what is commonly called a floor; once earnings are credited to your account, they are locked in and won’t be lost through market downturns.
  • An IUL allows you to leverage your own money by allowing you to borrow from yourself without IRS restrictions.
  • Money borrowed from your IUL through the variable loan option continues to be included in the interest-bearing balance; you can make money on the money in your pocket.
  • The insurance company charges you interest (just like a bank would) on money borrowed from your policy; the difference being that when you are done repaying your loan, you have your own money back plus interest.
  • An IUL includes what I call living benefits; these benefits provide access to a portion of your death benefit while you are still living for chronic, critical, or terminal illnesses.
  • An IUL is a life insurance policy, and expenses are heaviest during the first 10 years.
  • An IUL is a great way to pay your taxes now and grow your money while protecting against market loss and avoiding taxes on your gain.
  • An IUL is an individually designed policy based on your unique situation, budget, and desires.
  • An IUL is not right for every person and should be considered a long-term investment.

Indexing strategies, coverage, and benefits offered through an IUL vary by company. The information I’ve provided is based on the coverage offered by the companies I work with. If you would like to learn more, feel free to contact me by phone or email. I’d be glad to review your current coverage and discuss what might be best for you.

Photo by RODNAE Productions from Pexels

Kathy P. Rogers

Life Planner

“The process of planning for the unexpected begins with a conversation. I want to get to know you – your dreams, your goals, your passions. I want to know what makes you who you are. My goal is to listen, then help you design a plan that aligns with all these things as well as your budget.”

 Kathy Rogers is the vice president of Marston Rogers Group, a life planner and financial consultant. Reach her at (228) 206-5902 or at kathy@marstonrogers.com.

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