Index Universal Life (IUL)

Indexed universal life insurance, or IUL, is a type of universal life insurance. Rather than growing based on a fixed interest rate, it’s tied to the performance of a market index, like the S&P 500. One of the most attractive features of an IUL is the ability to take advantage of stock market returns without the risk of loss. And it does so while building up a death benefit that your beneficiaries will receive tax-free.  Unlike investing directly in an index fund, however, you won’t lose money when the market has a downturn. This is because a guarantee applies to your principal, insuring it against losses. On the other hand, there’s usually a cap on the maximum return you can earn. Many times, you’ll also be able to divide your assets between fixed and indexed portions of your policy.  It comes complete with a cash-value account.  They’re mainly differentiated by their flexibility, allowing you to adjust your premiums and death benefits.  You may also be able to realize higher interest rates on the growth of the cash value and use that cash value to pay for premiums.