📘 What Is an IUL?

An Indexed Universal Life (IUL) places an indexed investment account inside of a life insurance policy.

  • ✅ Lifelong protection for your family (death benefit)

  • ✅ Tax-advantaged growth (cash value linked to the market)

  • ✅ Flexible access, no penalties to access your own money!

Your money (called a premium) goes to the insurance company, which splits it into two parts:

  1. Protection

    Pays for your life insurance — creating an immediate death benefit for your family.

  2. Cash Value Growth

    Goes into a cash account tied to a stock market index (like the S&P 500), but…

    • You’re not investing directly in the market

    • You have a floor (you can’t lose money due to market drops)

    • You have a cap (your gains are limited to a maximum, often ~9–11%)

🛡 How the Life Insurance Portion Works

Your IUL is first and foremost life insurance — and that matters.

  • Meets IRS Code 7702 (non-investment contract when within IRS limits)

  • It provides a tax-free death benefit to your loved ones

  • It pays your loans when you pass away

  • It builds living benefits for you if you get sick (terminal or chronic illness riders may apply)

👉 It’s peace of mind today… and retirement income tomorrow.

📈 How the Cash Value Grows

Every year, your cash value is linked to the performance of an index. Here’s how it works:

  • 📉 If the market drops → You don’t lose anything (0% floor)

  • 📈 If the market rises → You gain up to a cap (often 9–11%)

  • 🔁 Your gains lock in each year — never sliding backward

Over time, this creates stable, compounding growth without market risk.

📊 How Index Crediting Works

There are different strategies for how your cash value tracks the index. The most common is:

  • Annual Point-to-Point

    Measures the change in the index from one year to the next.

Other methods may include:

  • Monthly averaging

  • Performance triggers

⚠️ Reminder: You’re not investing in the market — your account just follows its movement to credit interest.

💸 Tax-Free Income in Retirement

One of the most powerful benefits of an IUL is the ability to create tax-free retirement income.

Here’s how:

  • You fund the policy with after-tax dollars

  • Your cash value grows tax-deferred

  • Later, you borrow against your cash value — income that’s tax-free under current tax law

No required distributions. No taxes on gains. No penalties.

💡 Using Loans the Smart Way

When it’s time to take income, you’ll use a loan strategy:

  • ✅ Variable/Indexed Loans let your full balance stay invested

  • ✅ You access cash without interrupting your growth

  • ✅ When designed properly, these loans never need to be repaid during life

This is how the wealthy tap into policies to build lifetime income while keeping their money growing.