What is an IUL?
Understand Your Future
What is IUL Insurance?
IUL (Indexed universal life) insurance, is a type of life insurance that can offer you a number of benefits. Importantly, an IUL offers flexibility and financial security. These types of insurance give you the potential to take advantage of stock market returns, without worrying about the market’s high risk. This is done by taking advantage of a stock market index, for example, the S&P 500. You are then paid interest based on the movement of the index or indexes. Your initial payment is covered by a guarantee* that protects it against loss.
Types of IUL Insurance
Several types of universal life insurance are available.
One example, an inflation-adjusted fixed rate. Another example, the variable rate.
However, a variable rate is invested directly in the stock market, so it carries more risk. IUL policies offer some advantages over other universal life insurance policies. An IUL may be a good option for retirees seeking more flexible insurance, that offers higher growth potential. Contact our team here at Sonoma Financial for more information.
How IUL Insurance Works: An Overview
So, how do IULs actually work? Basically, premiums cover a portion of the cost, based on the life expectancy of the insured. Cash value is added to the rest. Your money may also earn an interest rate based on an index. The cash value is credited with interest, based on how the index increases. Additionally, no direct investment into the stock market is made. And, some policies may allow you to select multiple indexes, not just one. This offers you even more flexibility.
You can allocate your money in a number of ways. Certain policies earn a fixed interest rate, while others fluctuate according to an index. This cash may also earn interest based on that index. Also, you can earn interest on the third part of your money, if you decide to put your money into another index. Clearly, choosing an IUL can offer you a lot flexibility when planning for your retirement. Connect with us to learn more.
IUL insurance can benefit your retirement strategy in several ways. These include:
Safeguarding Your Money
Insurance companies protect your money from loss. You are at no risk of losing your principal payment, even if the stock market crashes.
More Flexible Options
An IUL is a product that can come with a lot of flexibility. IULs don’t come with contribution limits, and there’s no penalty for withdrawing the money at a certain time, and no required minimum distribution. These are the ways that an IUL differs from more traditional retirement accounts. They also don’t apply to the same tax laws as these accounts. Another benefit? You can access your death benefit while still alive, if needed, and use it to pay for long-term care, tax-free*.
Preserving Your Legacy
After you pass away, your family may inherit some of your wealth. With an IUL, the death benefit may increase over time, depending upon how well the index performs. Beneficiaries usually receive more than the amount of the initial contribution. Furthermore, the death benefit is permanent, nontaxable, and avoids probate.
Attend one of our educational events, or schedule a one-on-one meeting with us, to learn more about IUL insurance and if it could be right for you.