Life Insurance

What is an IUL?

Elderly couple on an easy hike - what is an IUL

An IUL (indexed universal life) insurance policy, like any life insurance policy, provides a death benefit. However, this isn’t the only way it can help you.

There are a few different types of life insurance. First, there’s fixed rate, which is subject to inflation. Next, there’s variable rate, which is based on the stock market, so it comes with what may be too much risk. With an indexed universal life insurance policy, the interest is based on a market index, hence the name. However, your principal amount is protected (backed by the claims-paying ability of the carrier) even in the event of a market drop. Additionally, the money gets to your beneficiaries without having to go through probate court.

How Does an IUL Work?

In addition to simply providing a death benefit, an IUL can help retirees in several ways, both by providing benefits to you during retirement and to your heirs after you have passed away.

Legacy Benefits

Of course, IULs give policyholders a way to protect their legacy. There are a few benefits to using an IUL for this purpose:

The money left for your beneficiaries will typically be larger than the amount you initially put into the policy. Furthermore, this amount may increase with time. Because it is a life insurance policy benefit, your loved ones won’t need to go through probate to have access to the money. And, the income your family receives from your IUL is tax-free.*

Living Benefits

An IUL policy offers more flexibility compared to some other financial vehicles. For example, as it is an insurance product, tax laws surrounding it are different from that of traditional retirement accounts such as 401(k)s or IRAs.

IULs have no contribution limits, no income limits, and no income restrictions. Additionally, required minimum distributions (RMDs) do not apply, nor do penalties for withdrawing money earlier than age 59 1/2. Furthermore, you can fund your IUL policy with one lump sum of money, or over time. And, because your cash value is liquid, you can access it for income, without paying income tax. Also, your cash value accumulation happens income tax-free.*

There are numerous options to choose from when it comes to life insurance, so be sure to contact us. We can chat with you about what an IUL is and if it might be right for you.

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