Indexed universal life insurance
Permanent life insurance with more flexibility built in.
Start by telling us what you're looking for. A licensed Policy Profile agent can help you review available options.
Indexed Universal Life insurance, often called IUL, combines permanent life insurance with a cash-value component whose interest crediting can be linked in part to the performance of a market index. Policy Profile can help you explore how this type of coverage works and whether available options may fit your goals.
How IUL works
Life insurance first, with a cash-value component.
IUL is a form of permanent life insurance. It is designed to provide a death benefit for as long as the policy remains in force under its terms.
- Like other universal life policies, IUL has a policy value, often called cash value.
- Premiums, interest credits, insurance costs, expenses and other policy activity all affect that value. Not every premium dollar goes into cash value.
- What sets IUL apart from traditional fixed universal life is that some of its interest crediting can be based on changes in an external market index.
- Cash value growth is not guaranteed. How the policy performs depends on its terms and on how it is funded and used.
Indexed doesn't mean invested
Your policy isn't invested directly in the stock market.
An IUL policy may use the performance of an external index as one part of a formula for determining interest credits. That is all the index does.
- What the index is
- A reference point. The insurer measures changes in the index over a defined period, according to the policy's crediting method.
- What you don't own
- Through the policy, you do not own the stocks or other securities in that index.
- Why the numbers differ
- Index performance is not the same thing as the interest credited to the policy. The insurer applies the policy's stated crediting method, and the result can be different from the index's movement.
Caps, participation rates and floors
How indexed interest crediting can work
Most indexed strategies use a few terms that shape how a measured index change becomes an interest credit. The examples below are hypothetical and educational only — they do not describe any specific product or any carrier Policy Profile works with.
- Cap
- A cap can limit the amount of index-related interest credited for a particular period.
- Hypothetical exampleIf an indexed strategy had an 8% cap and the relevant index calculation produced a 12% increase, the policy would not necessarily receive 12%. The cap would limit the index-related credit used for that period.
- Participation rate
- A participation rate determines what portion of the measured index gain is used in the crediting calculation.
- Hypothetical exampleA hypothetical 80% participation rate applied to a 10% measured index increase would use 8% before considering other applicable policy terms.
- Floor
- An indexed strategy may have a minimum crediting rate, often called a floor, which sets the lowest index-related interest credit for a period.
- Worth knowingA floor applies to the index credit only. It is not a floor on the policy's overall value.
Educational example only. Actual policy terms vary.
Important: A 0% index-crediting floor does not mean the policy cannot lose value. Insurance costs, expenses, withdrawals, loans and other policy charges can still reduce policy value.
The sequence
From the index to your policy value, in four conceptual steps.
- Index performanceAn external index changes over a measured period.
- Policy crediting methodThe insurer applies the policy's stated terms, such as caps, participation rates and floors.
- Possible interest creditThe result, if any, is credited to the policy as interest.
- Policy valueLess insurance costs, expenses and other charges. Loans, withdrawals and other policy activity also affect this value.
Conceptual only. This is not a projection and does not show or imply any future result.
Cash value
A value that can change over time.
IUL policies can accumulate cash value. That value can move in either direction, because it reflects everything happening inside the policy.
Actual performance can differ materially from illustrated values, and nonguaranteed policy elements can change over the life of the policy.
What affects cash value
Accessing policy value
Can you access IUL cash value?
Policyowners may be able to access available policy value through withdrawals and/or policy loans, subject to the specific contract.
- Loans and withdrawals can reduce available policy value.
- They can reduce the death benefit.
- They can affect policy performance.
- Excessive loans or withdrawals can contribute to a lapse.
- Tax consequences can occur in some circumstances.
Policy loans and withdrawals should be reviewed carefully with the insurer or a qualified professional.
Life insurance can have tax considerations that depend on policy design, transactions and individual circumstances. Policy Profile does not provide tax advice; consumers should consult a qualified tax professional regarding their situation.
Staying on track
Why an IUL policy needs to be monitored
IUL has more moving parts than many policies. Reviewing it periodically helps you see how it is tracking. Policy value and continued coverage can be affected by:
If policy value is not sufficient to cover required charges, additional premium may be needed to keep the policy in force, depending on the contract and any applicable guarantees.
Understanding an illustration
An illustration is not a prediction.
- An IUL illustration shows how a policy could perform under specified assumptions.
- Some values may be guaranteed, while others are nonguaranteed.
- Nonguaranteed illustrated values can be higher or lower than actual future results.
- It's important to understand the assumptions an illustration uses.
- The actual product terms govern, not the illustration.
- Guaranteed elements
- Values the contract commits to under its stated terms and conditions.
- Nonguaranteed elements
- Values based on assumptions — such as future crediting or charges — that can change.
A licensed Policy Profile agent can help you review the carrier illustration associated with an available product.
Is it a fit?
When might someone explore Indexed Universal Life?
- Someone looking for permanent life insurance.
- Someone who values the premium or death-benefit flexibility a particular policy offers.
- Someone interested in potential cash-value accumulation in addition to death-benefit protection.
- Someone whose goals extend beyond a temporary coverage period.
- Someone comfortable reviewing and periodically monitoring a more complex life insurance product.
IUL isn't the right fit for everyone. Consumers primarily seeking straightforward protection for a defined period may find Term Life easier to understand and potentially more aligned with that goal.
IUL and term life
Different structures for different planning horizons.
Indexed universal life
- Permanent life insurance.
- Flexible universal-life structure.
- May accumulate cash value.
- Indexed interest-crediting options.
- More moving parts to understand and monitor.
- Generally intended for longer-term planning needs.
Term life
- Protection for a defined period.
- Generally no cash value.
- Comparatively straightforward structure.
- Commonly used for income replacement, mortgages, dependents and other temporary needs.
Neither is universally better, and some people own both. Learn more about Term Life Insurance, or see how mortgage protection insurance is often built on term coverage.
IUL and whole life
Both can be permanent. They work differently.
Indexed universal life
- Universal-life structure.
- Flexible elements, depending on the contract.
- Index-based interest-crediting options.
- Nonguaranteed elements can play a substantial role.
Whole life
- Permanent coverage.
- Typically more predefined premium, death-benefit and cash-value guarantees, depending on the product.
- Cash value does not use the same indexed-crediting structure as IUL.
Guarantees and features vary by product, and not every whole life policy is identical. Smaller whole life policies are often used for final expense insurance.
Start with your goals
The right place to begin isn't a rate — it's what you want the policy to do.
IUL policies can differ substantially in:
That's why Policy Profile starts by learning about you and what you're trying to accomplish.
How Policy Profile's IUL process begins
- About youA few basics, such as your ZIP code, date of birth and sex.
- Your goalsWhether you're focused on long-term protection, building cash value over time, both — or not sure yet.
- ConnectA licensed Policy Profile agent can then help you review available IUL options.
Licensed guidance
Complex coverage deserves a clearer conversation.
Policy Profile is a licensed insurance agency, and we work with multiple life insurance companies. IUL products can differ materially from one another.
A licensed Policy Profile agent can review available products and carrier illustrations with you — helping you understand what is guaranteed, what is not guaranteed, and how the policy is designed.
Common questions
Common questions about indexed universal life insurance.
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What is Indexed Universal Life insurance?
Indexed Universal Life (IUL) is a form of permanent universal life insurance. It has a cash-value component, and it offers interest-crediting options that are linked in part to changes in an external market index. The death benefit is designed to last while the policy remains in force under its terms.
Is IUL invested in the stock market?
No. An IUL policy is not directly invested in the index or in the securities that make up the index. Index performance is used as part of the insurer's interest-crediting formula, and the interest credited can differ from the index's movement.
Can I lose money in an IUL policy?
Policy value can decline. Even when an indexed strategy has a 0% crediting floor, that floor applies only to index-related interest. Insurance costs, expenses, loans, withdrawals and other policy charges may still reduce policy value, so how a policy is funded and used matters.
What are a cap and participation rate?
A cap can limit the amount of index-related interest credited for a period. A participation rate determines what portion of a measured index gain is used in the crediting calculation. These terms vary by product and can affect the interest credited.
Is IUL cash value guaranteed to grow?
No. Which elements are guaranteed and which are nonguaranteed varies by product, and nonguaranteed elements can change. Actual performance can differ from what an illustration shows.
Can I borrow from an IUL policy?
Policy loans may be available, depending on the contract. Loans can affect policy value, the death benefit and policy performance, and they may have tax consequences. They should be reviewed carefully with the insurer or a qualified professional.
Is IUL the same as Whole Life insurance?
No. Both can provide permanent coverage, but their policy structures and cash-value mechanics differ. Whole life typically has more predefined guarantees depending on the product, while IUL uses a flexible universal-life structure with index-based crediting options.
Is IUL better than Term Life insurance?
Neither is universally better. The appropriate type of coverage depends on your needs, how long you need coverage, your budget and your goals.
Can Policy Profile show me instant IUL rates?
Policy Profile's current IUL experience begins by learning about you and your goals rather than displaying instant rate estimates. A licensed Policy Profile agent can then help review available IUL options and product-specific information.
Explore your options
See whether Indexed Universal Life fits what you're planning for.
Tell us a little about yourself and what you'd like your coverage to accomplish. A licensed Policy Profile agent can help you review available IUL options and understand the details.
Start with your goals. There's no need to choose a policy before you understand your options.