How IUL Works
A plain-English breakdown of Indexed Universal Life insurance — the same way we explain it to drivers every day.
1. Pay Your Premium
You pay a flexible premium. A portion covers the cost of insurance and policy charges, and the remainder is allocated to your cash value account.
2. Cash Value Grows
Your cash value can be credited interest based on the performance of a market index such as the S&P 500. Your money is not directly invested in the market.
3. Floor Protects You
Most IUL policies include a 0% floor. In a year when the index loses value, your indexed cash value is not directly reduced by that loss—though policy fees still apply.
4. Access Policy Loans
Policy loans may provide access to accumulated cash value and are generally not taxable when structured properly.
Key Terms Worth Knowing
Death Benefit
A tax-free payout to your beneficiaries when you pass away, helping replace your income and protect your family.
Cap & Participation Rate
Caps limit how much interest you earn in a strong market year. Participation rates determine the percentage of index gain credited to you.
Properly Structured
An IUL works best when designed for long-term growth. A licensed professional can structure your policy to balance death benefit and cash value.