How it works
An IUL policy provides a death benefit and builds cash value. Interest is credited based in part on the performance of an index, such as a stock market index, subject to limits set by the insurer. You are not investing directly in the market, and the policy has charges for the cost of insurance and other fees.
Features to understand
- Caps and participation rates. These limit how much of an index’s gain is credited, and an insurer may be able to change them.
- A floor. Many policies include a minimum credited rate that limits index losses, though policy charges still apply.
- Flexibility. Premiums and death benefits can often be adjusted within limits.
Things to consider
- Illustrations are projections, not promises. Ask to see the guaranteed column as well as the projected one.
- Lapse risk. If there isn’t enough value to cover the charges, the policy can lapse.
- Loans and withdrawals. These can reduce the death benefit and cash value.
- Complexity. IUL has more moving parts than term or whole life, so it’s worth taking time to review it.
Questions to ask
- What are the current caps, participation rates and charges, and can they change?
- What does the policy look like using only the guaranteed assumptions?
- How much premium is needed to keep the policy in force?
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This page is general educational information. It is not tax or legal advice and it isn’t a recommendation for any specific product. Features, costs and availability vary by carrier and state.
Guarantees are subject to the claims-paying ability of the issuing insurer.