Our Services: Life Insurance

What is an IUL?

An indexed universal life (IUL) insurance policy is an option that comes with many benefits. Yes, they provide a death benefit, but they can be helpful to you in several other ways. For example, use as a source of income while you are still alive. Firstly, policyholders benefit from their money being protected. The money kept in your IUL policy is unaffected by an event such as a stock market drop. In this way, it has an advantage over more traditional financial vehicles like employer-issued retirement plan accounts. Furthermore, you may see a reasonable return rate** over time on the money you put in, because an IUL’s earnings are linked to an index. Hence, the name “indexed” is universal life insurance.

There are, however, some risks associated with annuities, depending on the type you have. You may have heard that an annuity product puts your money at risk. But the source that said so was probably referring to variable annuities. A variable annuity invests your money directly in the stock market. A fixed and indexed annuity (FIA) is different. An FIA comes with a guarantee* of safety on your principal. Based on your situation, we’d likely recommend an FIA, given that safety is our top priority when helping clients. However, safety is just one of many fixed indexed annuity benefits.

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How Does an IUL Work?

What is an IUL, and how does it work? Basically, an insurance company gives you a life insurance policy in exchange for your premium. The IUL policy is typically “max-funded,” meaning the total life insurance premium is paid upfront. This way, the insurance company keeps your money protected. Interest on the money in your policy is linked to an index, but the money isn’t directly invested in the stock market.

You may also have the option to link your IUL to multiple indexes. This spreads the potential rate of return,** rather than just relying on the performance of a single index. Some of your IUL may be earning a fixed interest rate, a different one may provide an alternate rate of return, and a third may be connected to provide another result. Due to all these possibilities, retirees should learn about the options available to them.

Benefits of Using an IUL?

There are several additional benefits to an IUL. First of all, they provide you with some flexibility. Tax laws function differently for an IUL compared to other retirement accounts. This is because it’s an insurance product, not a retirement plan account. Plans like 401(k)s, or IRAs come with contribution limits and restrictions on income. An IUL, however, doesn’t have any of these. Furthermore, they don’t come with required minimum distributions (RMDs.) Also, unlike other accounts, IULs don’t have any fees or fines if you decide to withdraw your cash value earlier than age 59 1/2.

Are you interested in learning more about these products? Reach out to us. You can come to one of our educational seminar events, where we’ll talk about IULs, other alternative ways of saving for retirement, and various factors that impact your retirement. Or, you could schedule a one-on-one meeting with us to discuss your situation.

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