What is Indexed Universal Life Insurance?

Indexed universal life insurance (IUL) is an insurance policy, often useful in retirement.

Because you can fully fund it, an IUL offers a potential option for retirees to generate tax-free income. In addition, because it is a life insurance policy, it offers a death benefit as well. An IUL is “universal” life insurance, which means it can offer more than just a traditional life insurance policy. Also, IULs carry other benefits that whole life and other universal life insurance plans may not. For instance, you may be able to protect your cash value, yet still receive a tax-free income from your IUL.

For some retirees, an IUL may be a helpful addition to their overall retirement plan. Basically, you buy an IUL policy with an insurance company. Because your money is used to buy an insurance product, the issuing company agrees to certain terms. One of those terms is that your money is not at risk of loss in the stock market. Instead, your life insurance links to a chosen index. This gives you indexed interest potential on your money. Regardless of the market conditions, an IUL may provide protection of your principal.

granddaughter visiting with grandma what is indexed universal life insurance roseville ca

For The Ones
You Love & Leave Behind

Some people use an IUL as a way to protect their wealth for their families. For instance, beneficiaries generally get a larger sum of death benefit than what you put into the policy. Also, it is possible that your death benefit increases with time. Of course, this depends upon several factors. Another note about IUL’s is they do not require probate court. Upon your passing, the death benefit simply goes to the people you designate in your IUL. Also, there is no tax on the amount they receive.

As with any tax questions, be sure to consult a qualified tax advisor. If you have questions about IULs and how they may fit into your retirement plan, contact us today. We offer “Tax-Free Income” seminars and webinars that help explain how IULs work. These events are complimentary so be sure to register to attend one soon.

Scroll to Top
cornerstone wealth and tax advisors